GIFT  OF 


DOCUMENTS 


1P14 


REPORT 


COMMITTEE  ON  CORPORATION 

LAWS. 


1903. 


PRINTED   AS   A   SENATE   DOCUMENT   BY   ORDER   OF   THE    SENATE. 


TABLE   OF   CONTENTS. 


PAGE 

LETTER  or  TRANSMITTAL, --  .  —  5 

ACT , 7 

INTRODUCTION, 9 

PART  I.  — ORGANIZATION  AND- CONDUCT  OF  CORPORATIONS 15 

SUMMARY  OP  CRITICISMS  OF  EXISTING  LEGISLATION 15 

SUMMARY  OF  CORPORATION  LEGISLATION  IN  MASSACHUSETTS,      ...  16 

THEORY  OF  LEGISLATION  RECOMMENDED, 20 

ARRANGEMENT  AND  APPLICATION  OF  PROPOSED  LEGISLATION,     ...  28 

PART  II.— TAXATION  OF  CORPORATIONS 31 

INTRODUCTION, 31 

Taxation  of  individuals, 32 

Limits  of  investigation 33 

Historical  summary  of  legislation, 34 

STATEMENT  OF  PRESENT  LAW 35 

As  to  foreign  corporations, 35 

As  to  domestic  corporations, 37 

APPLICATION  OF  PRESENT  LAW 44 

Generally, • 44 

To  corporations  whose  property  is  entirely  within  the  Commonwealth  and 
whose  corporate  franchise  does  not  exceed  in  value  its  real  estate,  ma- 
chinery and  merchandise, 45 

To  corporations  whose  property  is  entirely  within  the  Commonwealth  and 
whose  corporate  franchise  does  exceed  in  value  its  real  estate,  machinery 

and  merchandise, 46 

To  securities-holding  corporations, 50 

To  corporations  whose  property  is  partly  within  and  partly  without  the  Com- 
monwealth   52 

To  corporations  whose  property  is  wholly  without  the  Commonwealth,   .       .  54 

STATEMENT  OF  RECOMMENDED  LEGISLATION, 58 

STATISTICAL  TABLES  : 

Table  of  Massachusetts  corporations, 65 

Total  yield  of  taxes  collected  from  corporations  of  all  classes  for  the  years 

1885-1901  inclusive, 66 

Distribution  of  tax  on  public  service  and  other  corporations  for  the  years 

1897-1901  inclusive, 67 

PART  III.  — DRAFT  OF  THE  BUSINESS  CORPORATION  LAW, 69 


APPENDIX. 

APPENDIX  A.  DIGEST  OF  CORPORATION  LAWS  OF  ALL  THE  STATES  AND 

TERRITORIES 133 

APPENDIX  B.  REVENUE  DERIVED  BY  ALL  THE  STATES  FROM  THE  TAXATION 

OF  CORPORATE  FRANCHISES 299 

APPENDIX  C.    DRAFT  OF  AN  ACT  RELATING  TO  THE  TRANSFER  OF  STOCK,  .     305 


C0mm0tttoalt|r  of 


COMMITTEE  ON  CORPORATION  LAWS, 
STATE  HOUSE. 

HOSEA  M.  KNOWLTON,  Chairman. 
CHARLES  G.  WASHBUKN. 
FBEDERIC  J.  STIMSON. 

BOSTON,  Jan.  14,  1903. 

To  the  Honorable  Senate  and  House  of  Representatives. 

In  accordance  with  the  provisions  of  chapter  335  of 
the  Acts  of  1902,  we  have  the  honor  to  transmit  the  fol- 
lowing report  of  the  committee  appointed  to  consider  the 
laws  of  the  Commonwealth  in  relation  to  the  formation, 
taxation  and  conduct  of  all  corporations,  foreign  or  do- 
mestic, except  municipal,  banking  and  public  service  cor- 
porations. 

Very  respectfully, 

CHARLES   G.    WASHBURN. 
FREDERIC   J.    STIMSON. 


tfmnmonoiedtij  of  Jtla00cul)u0ette, 


In  the  Year  One  Thousand  Nine  Hundred  and  Two. 


[CHAP.  335.] 

AN  ACT  RELATIVE  TO  THE  CORPORATION  LAWS  OP  THE  COMMONWEALTH. 

Be  it  enacted,  etc.,  as  follows: 

SECTION  1.  The  governor  of  the  Commonwealth,  with  the  ad- 
vice and  consent  of  the  council,  shall,  within  thirty  days  after  the 
passage  of  this  act,  appoint  a  committee  of  three  persons,  citizens 
of  the  Commonwealth,  one  of  whom  he  shall  designate  as  chair- 
man, to  be  known  as  the  committee  on  corporation  laws. 

SECTION  2.  The  said  committee  shall  examine  and  consider  the 
laws  of  the  Commonwealth,  in  relation  to  the  formation,  taxation 
and  conduct  of  all  corporations,  foreign  or  domestic,  except  munic- 
ipal, banking  and  public  service  corporations.  The  committee  shall 
compare  the  said  laws,  and  their  effect  upon  trade,  commerce  and 
manufactures,  with  the  corresponding  laws,  and  their  effect,  in 
other  states  and  countries,  especially  in  respect  to  matters  of  tax- 
ation, and  shall  consider  and  determine  whether  the  corporation 
laws  of  other  states  or  countries  are  more  favorable  than  those  of 
this  Commonwealth  to  the  growth  of  trade,  commerce  and  manu- 
factures and  if  so,  in  what  particulars.  The  committee  shall  fur- 
ther consider  and  determine  what  legislation,  if  any,  is  necessary 
to  make  the  relations  existing  between  the  Commonwealth  and  said 
corporations  more  advantageous  to  the  Commonwealth  and  to  the 
public  interest. 

SECTION  3.  The  said  committee  may  establish  rules  and  regu- 
lations for  the  conduct  of  its  business,  and  shall  be  provided  with 
suitable  quarters  by  the  sergeant-at-arms  in  the  state  house  or 
elsewhere.  It  may  employ  experts  and  all  necessary  clerical  and 
other  assistance,  and  may  incur  such  reasonable  expenses,  includ- 


8  Report  of  Committee 

ing  travelling  expenses,  as  may  be  authorized  by  the  governor  and 
council.  Before  incurring  any  expense  the  committee  shall  from 
time  to  time  estimate  its  probable  amount,  and  submit  the  esti- 
mate to  the  governor  and  council  for  their  approval,  and  no 
expense  shall  be  incurred  by  the  committee  beyond  the  amount  so 
estimated  and  approved.  The  said  committee  shall  receive  such 
remuneration  as  may  be  fixed  by  the  governor  and  council. 

SECTION  4.  Said  committee  shall  complete  its  investigation  on 
or  before  the  first  day  of  January  in  the  year  nineteen  hundred  and 
three,  and  shall  report  the  result  thereof,  in  print,  to  the  general 
court,  on  or  before  the  second  Wednesday  in  January  in  said  year. 
If  said  committee  recommends  any  legislation  it  shall  accompany 
its  report  with  drafts  of  such  bills  as  are  necessary  to  carry  such 
recommendations  into  effect.  The  powers  of  said  committee  shall 
terminate  on  said  second  Wednesday  in  January. 

SECTION  5.  This  act  shall  take  effect  upon  its  passage.  \_Ap- 
proved  April  23,  1902. 


on  Corporation  Laws.  9 


INTRODUCTION. 


During  the  last  few  years  it  has  become  apparent 
that  the  present  corporation  laws  of  Massachusetts 
are  unsuited  to  existing  industrial  conditions  and  that 
they  prevent  the  fullest  legitimate  employment  of 
capital  under  Massachusetts  charters.  A  deliberate 
examination  of  the  laws  of  this  Commonwealth, 
governing  the  organization,  conduct  and  taxation  of 
manufacturing  and  trading  corporations,  has  from 
time  to  time  been  urged  by  boards  of  trade  and 
individuals  representing  the  business  interests  of  the 
state. 

As  a  result  of  this  continued  agitation  and  discus- 
sion, an  act,  authorizing  the  appointment  of  a  com- 
mittee to  "examine  and  consider  the  laws  of  the 
Commonwealth  in  relation  to  the  formation,  taxation 
and  conduct  of  all  corporations,  foreign  or  domestic, 
except  municipal,  banking  and  public  service  corpo- 
rations "  was  approved  April  23, 1902.  In  pursuance 
of  the  duties  with  which  it  was  charged,  the  com- 
mittee has  critically  examined  the  laws  of  this  Com- 
monwealth and  has  compared  them  with  the  existing 
laws  of  other  states  and  countries  in  relation  to  the 
formation,  conduct  and  taxation  of  business  corpora- 
tions. Insurance  companies,  although  not  expressly 
excluded  by  the  terms  of  the  act,  did  not  appear  to 


10  JReport  of  Committee 

the  committee  to  fall  within  the  scope  of  examina- 
tion intended  by  the  General  Court  and  it  therefore 
does  not  include  them  in  its  report. 

It  appears  from  the  law  creating  the  committee,  as 
well  as  from  the  bills  introduced  and  the  discussion 
upon  them,  that  the  intention  of  the  Legislature  was 
to  make  a  sharp  distinction  between  "  public  service 
corporations,"  i.e.,  those  corporations  which  have 
special  rights  or  franchises  and  necessarily  tend  to 
monopoly,  and  therefore  require  constant  supervision 
by  the  state,  and  ordinary  business  corporations  as  to 
which  no  such  principle  exists.  The  old  established 
policy  of  the  Commonwealth  should  be  maintained 
as  to  all  public  service  corporations,  e.g.,  railroads, 
gas  companies,  water  companies, —  generally  the  class 
of  corporations  which  the  committee  has  attempted 
to  define  in  Section  1,  Clause  C,  of  its  proposed  act, — 
while  modern  and  more  liberal  theories  may  well  be 
adopted  as  to  ordinary  business  or  trading  corpora- 
tions, in  which  the  public  is  not  concerned  except  in 
so  far  as  it  should  be  guarded  from  fraud.  The  rec- 
ommendations of  the  committee  are  therefore  limited 
to  such  corporations  as  have  a  capital  stock  and  are 
established  for  the  purpose  of  carrying  on  business 
for  profit  under  the  general  and  special  laws  of  the 
Commonwealth.  Insurance  companies,  financial  in- 
stitutions of  every  description,  and  public  service 
corporations  included  under  the  broadest  possible 
definition  are  expressly  excluded.  While  the  act 
recommended  applies  to  corporations  organized  for 
the  purpose  of  buying  and  selling  real  estate  and  of 
distilling  or  manufacturing  intoxicating  liquors,  it 


on  Corporation  Laws.  11 

does  not  permit  the  organization  of  such  corporations 
without  special  charters. 

The  Committee  on  Corporation  Laws  met  for  or- 
ganization on  Friday,  May  23,  1902.  It  advertised 
for  written  suggestions  or  statements,  touching  the 
matters  submitted  to  its  consideration,  and  prepared 
a  syllabus  of  questions  which  was  mailed  to  promi- 
nent lawyers  and  business  men  throughout  the  Com- 
monwealth and  elsewhere.  During  its  investigation 
the  committee  has,  at  various  times,  communicated 
with  administrative  officers  of  all  the  States  of  the 
Union.  Hearings  attended  by  witnesses  represent- 
ing various  business  interests  of  the  Commonwealth 
were  held  during  the  months  of  June  and  July.  The 
members  of  the  committee  were  engaged  upon  work 
especially  assigned  during  the  month  of  August  and, 
upon  resuming  its  meetings  in  September,  a  printed 
draft  of  a  bill  embodying  suggested  changes  in  the 
law  was  presented  for  its  consideration.  During  the 
months  of  September  and  October  the  hearings  of  the 
committee  were  resumed  and  the  discussion  with 
witnesses  was  based  upon  the  draft  so  prepared,  and 
was  continued  until  the  final  draft  was  adopted  dur- 
ing the  month  of  December. 

Mr.  Grosvenor  Calkins,  of  the  Boston  bar,  has 
brought  to  the  performance  of  the  exacting  duties  of 
permanent  secretary  to  the  committee  an  acquaint- 
ance with  the  subject  and  an  executive  ability  of  a 
high  order  which  have  made  his  services  of  the 
greatest  value.  Mr.  Frederic  J.  Macleod  has  pre- 
pared for  the  committee  an  exhaustive  digest  of  leg- 
islation in  other  States  concerning  the  capitalization 


12  Report  of  Committee 

and  taxation  of  business  corporations,  which  is  an- 
nexed to  this  report.  Mr.  George  Gushing  under- 
took and  completed  for  the  committee  an  examination 
of  the  most  recent  legislation  of  other  States  govern- 
ing the  organization  and  conduct  of  corporations; 
and,  in  the  preparation  of  the  final  drafts  of  the  rec- 
ommended law,  the  committee  has  availed  itself  of 
the  valuable  services  of  Mr.  Charles  M".  Harris  in 
critically  examining  the  effect  of  the  proposed 
legislation  upon  existing  laws  and  in  assisting  the 
committee  in  drafting  various  sections  of  the  recom- 
mended law.  To  the  hearty  co-operation  of  the  Tax 
Commissioner  of  the  Commonwealth  is  due  the  ac- 
knowledgment of  the  committee  for  assistance  ren- 
dered at  every  point  in  its  investigation. 

The  report  of  the  committee  is  divided  into  three 
parts. 

I.  A  short  review  of  the  criticisms  which  have 
been  made  upon  the  existing  laws  of  Massachusetts 
governing  the  organization,  control  and  taxation  of 
business  corporations,  an  historical  summary  of  corpo- 
ration legislation  in  the  Commonwealth,  together  with 
a  reference  to  the  more  recent  legislation  in  other 
States  on  this  subject,  and  a  statement  of  the  funda- 
mental principles  which  have  guided  the  committee 
in  its  recommendations. 

II.  A  consideration  of  the  existing  laws  touching 
the  taxation  of  corporations  and  the  changes  recom- 
mended therein. 

III.  A  draft  of  the  proposed  Business  Corpora- 
tion Law,  the  adoption  of  which  the  committee  rec- 


on  Corporation  Laws.  13 

ommends,  with  marginal  references  to  the  Kevised 
Laws. 

IY.  An  appendix  containing  (a)  a  statement 
of  the  laws  of  other  States  -governing  the  taxation 
and  organization  of  business  corporations  ;  (5)  -a 
summary  of  the  results  of  the  committee's  investi- 
gations of  the  revenue  received  in  other  States 
from  the  taxation  of  corporate  franchises;  (c)  the 
draft  of  an  act  extending  to  all  corporations  the 
provisions  recommended  by  the  committee  govern- 
ing the  transfer  of  stock. 


The  committee  had  substantially  completed  its 
investigations  and  reached  its  conclusions  early  in 
December  when  its  chairman,  Hon.  Hosea  M. 
Kn  owl  ton,  was  stricken  with  an  illness  which  has 
since  proved  fatal. 

His  associates  feel  fully  warranted  in  saying  that 
most  of  the  recommendations  contained  in  the  report 
have  had  his  unqualified  approval.  They  desire  to 
express  their  deep  appreciation  of  the  value  of  his 
services  as  a  member  of  the  committee  and  their  very 
keen  regret  that  a  life  so  full  of  usefulness  and  of 
honor  should  have  been  so  suddenly  cut  off. 


PART  I. 


ORGANIZATION  AND    CONDUCT   OF    CORPORATIONS. 


1.  SUMMARY  OF  CRITICISMS  OF  EXISTING  LEGISLA- 
TION. 

Reference  has  already  been  made  in  the  intro- 
duction to  the  widespread  belief  that  the  present 
corporation  laws  of  Massachusetts  are  unsuited  to 
existing  industrial  conditions  and  that  they  are  an 
obstruction  to  the  fullest  legitimate  employment  of 
capital  under  Massachusetts  charters.  This  criti- 
cism of  the  existing  laws  of  the  Commonwealth 
is  particularly  directed  at  the  following  points:  — 

First.  The  arbitrary  limitation  of  the  amount 
of  capital  stock  and  the  restrictions  imposed  upon 
its  payment,  the  difficulties  of  increasing  capital- 
ization  after  organization  and  the  inability,  until 
the  issue  of  preferred  stock  was  authorized  by  the 
last  Legislature,  to  create  two  or  more  classes  of 
stock  with  such  rights  and  limitations  as  may  be 
determined  by  the  corporation. 

Second.    The  liability  of  stockholders  for  amounts  \/M  \^\f. 
in  excess  of  their  actual  or  contracted  investment,     ^  ' 
and  particularly  the  liability  of  directors  for  all  the 
debtSv.  of   the   corporation,  not  only  resulting  from 
their  fraudulent  or  dishonest  acts,  but  in  some  cases 
arising  out  of  the  ordinary  chances  of  business. 


16  Report  of  Committee 

Third.  Perhaps  the  most  serious  criticism  of  the 
present  corporation  laws  of  the  State  relates  to 
taxation,  a  consideration  of  which  subject  consti- 
tutes Part  II.  of  this  report. 

2.    SUMMARY  OF   CORPORATION  LEGISLATION  IN 

MASSACHUSETTS. 

A  brief  summary  of  the  history  of  corporation 
legislation  in  this  Commonwealth  will  explain  the 
development  of  the  present  laws  and  will  be  of  assist- 
ance in  answering  the  fundamental  question  as  to 
whether  the  industrial  and  economic  changes  which 
have  taken  place  during  the  past  fifty  years  have  not 
outgrown  existing  legislation.  Such  a  summary  may 
be  divided  into  two  parts;  (a)  the  period  before  1851 
which  marks  the  beginning  of  incorporation  under 
general  laws  in  this  State  and  (5)  the  period  subse- 
quent to  that  date. 

.„  v(a)   Before  1851    no   corporatidn   could   organize 
-jffi    except  by  special  act  of  the   Legislature.     In  1808 
(chapter  65)  the  first  legislation  governing  the  or- 
'  <v    (    ganization  and  conduct  of  corporations  so  organized 
: '  *       became   law.      The  act  is   short  and   by  no   means 
comprehensive.     It  contains  provisions  for  the  elec- 
tion of  clerk  and  treasurer,  the  adoption  of  by-laws, 
the  calling  of  the  first  meeting  of  the  organizers  of 
the  corporation,  the  transfer  and  sale  of  stock  and 
the  liabilities  of  stockholders.     By  chapter  53  of  the 
Acts   of    1829   the   liability   of  stockholders  which, 
under  the  Act  of  1808  was  practically  unlimited,  was 
confined  to  the  debts  of  the  corporation  in  excess  of 
the   amount   of  capital   stock  actually  paid   in.     In 


on  Corporation  Laws.  17 

1833  (chapters  83  and  49)  the  machinery  for  organi- 
zation and  for  dissolution  by  appointment  of  a 
receiver,  and  the  form  of  by-laws,  was  regulated  in 
substantially  the  same  language  as  is  found  in  the 
present  law.  (R.  L.,  chapter  109,  sections  4,  5,  13^ 
15,  16,  54  and  55.) 

(b)  Chapter  133  of  the  Acts  of  1851  marks  the 
beginning  of  incorporation  without  a  special  act  of 
the  Legislature.  Under  the  provisions  of  this  act, 
incorporation  under  general  law  was  permitted  for 
the  purpose  of  carrying  on  any  kind  of  mechanical 
or  manufacturing  business  or  a  mining  or  quarrying 
business.  For  the  following  twenty-three  years,  by 
succeeding  acts  of  the  Legislature,  the  purposes  for 
which  corporations  could  be  organized  under  general 
laws  were  enlarged  to  cover  the  printing  and  pub- 
lishing trades,  the  fishing  business,  the  business  of 
manufacturing  and  furnishing  gas,  steam  and  hot 
water,  the  business  of  acting  as  common  carriers  of 
persons  or  property  and  the  business  of  erecting 
hotels  and  public  halls.  Finally,  in  1874,  corpora- 
tions organized  for  any  lawful  purpose,  except  for 
the  purpose  of  distilling  or  manufacturing  intoxicat- 
ing liquors,  for  buying  and  selling  real  estate,  for 
banking  or  insurance,  or  for  any  other  business  pro- 
hibited by  law,  were  permitted  to  incorporate  under 
general  laws,  but  the  capitalization  of  each  of  these 
classes  of  business  was  arbitrarily  limited.  For 
example,  no  corporation  could  be  organized  for  the 
business  of  printing  or  publishing  or  for  the  purpose 
of  erecting  hotels  and  public  halls,  with  a  capitaliza- 
tion exceeding  five  hundred  thousand  dollars.  Cor- 


18  Report  of  Committee 

porations  organized  for  the  purpose  of  carrying  on 
any  mechanical  or  manufacturing  business,  until  1899, 
or  to  act  as  common  carriers,  or  for  any  other  lawful 
purpose  were  limited  arbitrarily  in  their  capitalization 
to  one  million  dollars. 

Few  changes  have  been  made  since  1851  in  the 
laws  governing  the  payment  in  of  capital  stock  and 
the  liability  of  stockholders  and  directors.  In  1875 
(chapter  177)  corporations  were  permitted  to  issue 
stock  for  property  if  the  approval  of  the  Commis- 
sioner of  corporations  was  secured  as  to  its  valua- 
tion ;  and  the  last  Legislature  authorized  the  issue 
of  preferred  stock  (Acts  of  1902,  chapter  441).  It 
is  unnecessary  for  the  committee  to  refer  to  the 
changes  in  business  necessities  which  have  taken 
place  during  the  last  half  century.  Business  is  not 
and  cannot  now  be  conducted  under  the  limitations 
imposed  fifty  years  ago.  No  radical  and  important 
departure,  except  in  the  two  particulars  noted  above, 
has  been  made  during  the  past  fifty  years  by  the 
Commonwealth  of  Massachusetts  in  its  system  of 
corporation  laws. 

An  important  part  of  the  duties  of  the  committee 
has  been  to  examine  and  determine  the  effect  of  the 
corporation  laws  of  other  States.  Until  within  the 
past  ten  years  the  practice  of  foreign  incorporation 
was  not  general.  It  is  not  difficult  to  determine  the 
reasons  for  this.  The  more  radical  changes  in  corpo- 
ration legislation  in  other  States  have  taken  place 
during  the  past  ten  or  fifteen  years  and  the  very 
radical  change  in  business  methods  noted  above  has 
largely  taken  place  during  the  same  period.  During 


on  Corporation  Laws. 


19 


the  past  ten  years  moreover,  the  possibilities  of  incor- 
poration in  other  States  have  become  well  known  and 
have  been  availed  of  to  the  detriment  of  this  Com- 
monwealth. The  following  table  shows  the  number 
of  Massachusetts  and  of  foreign  corporations  which 
have  annually  filed  organization  papers  during  the 
past  five  years. 


Massachusetts 
Corporations. 

Foreign 
Corporations. 

1897,         

280 

263 

1898,         

251 

298 

1899,         

281 

466 

1900,         

264 

423 

1901,         

291 

524 

It  should  be  noted  that  the  number  of  foreign  cor- 
porations annually  establishing  an  office  in  the  State 
for  the  transaction  of  business  has  practically  doubled 
during  the  past  five  years.  During  the  same  period 
the  number  of  domestic  corporations  shows  no  ma- 
terial increase,  and,  as  all  public  service  corporations,, 
including  street  railway  companies,  are  included  in 
the  statement  of  domestic  corporations,  it  is  fair  to 
conclude,  in  view  of  the  well  recognized  increase  in 
the  number  of  public  service  corporations,  that  there 
is  a  constantly  diminishing  number  of  Massachusetts 
business  corporations  organized  ench  year.  It  should 
also  be  noted  that  the  statistics  given  above  do  not 
include  the  important  and  doubtless  large  class  of 
corporations  organized  by  Massachusetts  citizens 
with  Massachusetts  capital  which  do  business  under 


20  Report  of  Committee 

a  foreign  charter  and  have  no  office  within  the  Com- 
monwealth. 

The  investigations  of  the  committee,  the  results 
of  which  have  been  briefly  summarized,  have  led  to 
the  following  conclusions  :  — 

First.  —  That  the  more  important  provisions  of 
the  present  law  regulating  the  organization  and  con- 
duct of  business  corporations  and  the  liability  of  its 
stockholders  and  officers  are  unsuited  to  modern  busi- 
ness conditions. 

Second.  —  That  the  restrictions  governing  capital- 
ization and  the  payment  of  stock  as  shown  in  the 
piecemeal  legislation  enlarging  the  classes  of  corpo- 
rations which  may  organize  under  general  laws  are 
arbitrary  or  impossible  of  execution. 

Third.  —  That  it  is  a  general  practice  to  organize 
under  the  laws  of  other  States  corporations  to  carry 
on  enterprises  which  are  owned  and  managed  by  citi- 
zens of  Massachusetts,  particularly  where  a  part  or 
all  the  property  is  situated  outside  the  State. 

3.     THEORY  or  LEGISLATION  RECOMMENDED. 

The  history  of  corporations,  as  well  as  the  logic  of 
the  case,  shows  that  there  are  possible  two  general 
theories  as  to  the  State's  duty  in  creating  corpora- 
tions; first,  the  old  theory  that,  being  creatures  of 
the  State,  they  should  be  guaranteed  by  it  to  the  pub- 
lic in  all  particulars  of  responsibility  and  manage- 
ment; and  the  modern  quite  opposite  theory  that,  in 
the  absence  of  fraud  in  its'  organization  or  govern- 
ment, an  ordinary  business  corporation  should  be 
allowed  to  do  anything  that  an  individual  may  do. 


on  Corporation  Laws.  21 

Under  the  old  theory  the  capital  stock  of  a  corpora- 
tion was,  in  the  law,  considered  to  be  a  guarantee 
fund  for  the  payment  of  creditors,  as  well  as  affording 
a  method  of  conveniently  measuring  the  interests  of 
the  individual  owners  of  a  corporate  enterprise. 
There  resulted  from  this  principle  not  only  the  fun- 
damental proposition  that  the  capital  stock,  being  in 
the  nature  of  a  guarantee  fund,  should  be  paid  up  at 
its  full  par  in  actual  cash,  but  all  the  other  provisions 
to  protect  creditors  or  other  persons  having  dealings 
with  the  corporation;  such  as,  that  the  debts  of  a 
corporation  should  not  exceed  its  capital  stock,  —  de- 
signed primarily  in  the  interest  of  creditors  and 
secondarily  in  that  of  the  stockholders,  who  were 
looked  after  as  carefully  as  if  they  were  the  wards  of 
the  Stale  when  dealing  in  corporation  matters.  Under 
the  modern  theory,  the  State  owes  no  duty,  to  persons 
who  may  choose  to  deal  with  corporations,  to  look 
after  the  solvency  of  such  artificial  bodies ;  nor  to 
stockholders,  to  protect  them  from  the  consequences 
of  going  into  such  concerns,  the  idea  being  that,  in 
the  case  of  ordinary  business  corporations,  the  State's 
duty  ends  in  providing  clearly  that  creditors  and 
stockholders  shall  at  all  times  be  precisely  informed 
of  all  the  facts  attending  both  the  organization  and 
the  management  of  such  corporations,  and  particu- 
larly that  there  should  be  full  publicity  given  to  all 
details  of  the  original  organization  thereof. 

The  committee  has  had  little  hesitation  in  deter- 
mining which  of  these  theories  it  should  adopt.  The 
limit  of  capitalization  both  in  amount  and  in  valuation 
to  the  net  tangible  assets  of  the  corporation  has 


22  Report  of  Committee 

unquestionably  had  much  to  do  with  the  arrest  of 
corporate  growth  in  this  Commonwealth.  Good-will> 
trade-marks,  patents  may  unquestionably  be  valuable 
assets,  which,  under  our  present  method,  may  not  be 
capitalized.  Admirable  as  this  theory  may  have  been, 
of  payment  of  capital  stock  in  full  in  cash,  the  condi- 
tion is  so  easily  avoided  in  practice  that  the  result  is 
that  our  existing  law  promises  a  protection  which,  in 
realty,  it  does  not  afford  and  is  merely  an  embarrass- 
ment to  those  who  feel  obliged  to  comply  not  only  with 
the  letter  but  with  the  spirit  of  the  law.  It  is  no  longer 
true  that  persons  dealing  with  corporations  rely  upon 
the  State  laws  to  guarantee  their  solvency  or  their 
proper  management.  The  attempts  of  the  Common- 
wealth to  do  so  by  laws  still  remaining  on  its  statute 
books  result,  as  we  apprehend,  only  in  a  false  sense  of 
security;  and  we  believe  that  the  act  proposed,  while 
giving  up  the  attempt  to  do  the  impossible  thing,  will 
really,  by  its  greater  attention  to  the  details  of  organ- 
ization required  to  be  made  public  by  all  corporations, 
result  in  an  advantage  to  stockholders  and  creditors 
more  substantial  than  the  present  partial  attempt  to 
enforce  a  principle  impossible  of  complete  realization 
and  which  is,  under  existing  laws,  easily  evaded. 

It  is  impossible  to  reconcile  or  combine  the  two 
systems.  Either  the  old  theory  must  be  maintained, 
under  which  the  State  attempts  though  vainly  to 
guarantee  both  to  stockholders  and  creditors  that 
there  is  one  hundred  dollars  of  .actual  value  behind 
each  one  hundred  dollars  of  par  value  of  capital 
stock,  or  some  other  system  must  be  adopted  which, 
while  not  being  chargeable  with  the  vagueness  and 


on  Corporation  Laws.  23 

laxity  of  the  newer  legislation  of  other  States,  will 
permit  a  share  of  capital  stock,  although  nominally 
one  hundred  dollars  in  value,  to  represent,  as  the 
word  implies,  only  a  certain  share  or  proportion, 
which  may  be  more  or  less  than  par,  of  whatever  net 
assets  the  corporation  may  prove  to  have.  Under  a 
system  of  this  sort  the  State  machinery  will  only 
provide  that  the  stockholders  and,  perhaps,  the  credi- 
tors, may  at  all  times  have  access  to  the  corporation 
records  or  returns  in  such  manner  as  clearly  to  show, 
both  at  organization  and  thereafter,  all  of  the  property 
or  assets  of  which  such  share  of  capital  stock  actually 
represents  its  proportion  of  ownership. 

The  question  of  monopoly  the  committee  does  not 
conceive  to  have  been  left  to  its  consideration.  The 
limitations  now  existing  on  the  capitalization  of  busi- 
ness corporations  are,  no  doubt,  attributable  to  the 
sentiment  which  has  always  existed  against  monopoly, 
but  it  is  clearly  the  policy  of  the  Commonwealth,  as 
shown  in  its  recent  legislation,  to  do  away  with  the 
attempt  to  prevent  large  corporations,  simply  because 
they  are  large.  Moreover,  it  is  apprehended  that  the 
question  of  monopoly,  or  rather  of  the  abuse  of  the 
power  of  large  corporations,  does  not  result  neces- 
sarily from  the  size  of  corporations  engaged  in 
business  throughout  the  United  States.  In  the 
opinion  of  the  committee,  some  confusion  has  been 
created,  in  the  discussion  of  the  form  of  so-called 
trust  legislation,  by  a  failure  to  appreciate  that  its 
real  object  is  not  to  protect  the  investor,  who  can 
or  should  learn  to  take  care  of  himself,  or  the 
creditor  who  has  already  learned  to  do  so.  The  real 


24:  Report  of  Committee 

purpose  of  such  legislation  is  the  protection  of  the 
consumer.  In  other  words,  there  is  no  reason  for 
an  arbitrary  limitation  *  of  capitalization  unless  it 
can  be  used  as  a  means  of  creating  a  monopoly 
which  will  influence  the  price  of  commodities.  In 
the  opinion  of  the  committee,  the  question  of  capi- 
talization is  not  a  contributing  factor  in  the  fight 
for  a  monopoly.  The  United  States  Steel  Company 
would  have  no  greater  and  no  less  a  monopoly  of 
the  steel  business  if  it  were  organized  with  one- 
half  of  its  present  capitalization.  The  Standard  Oil 
Company  has  a  very  conservative  capitalization,  and 
yet  it  is  the  most  complete  monopoly  of  any  indus- 
trial corporation  in  this  country. 

It  has  not  been  the  intention  of  the  committee 
to  draft  a  law  which  will  be  favorable  to  the  or- 
ganization of  large  corporations  popularly  known  as 
"  trusts."  Inasmuch  as  the  recommended  law  re- 
quires taxes  to  be  paid  upon  the  full  value  of  the 
corporate  franchise  which  is  at  least  to  some  extent 
measured  by  the  amount  of  capitalization  there  will 
always  be  this  very  potent  reason  for  keeping  capital- 
ization at  the  lowest  possible  point.  Indeed,  it  is 
apprehended  that  the  organization  of  a  corporation 
large  enough  to  control  a  monopoly  of  any  staple 
article  is  practically  prohibited  by  the  provisions  of 
the  recommended  law  as  to  taxation,  which  will  be 
referred  to  in  greater  detail  in  Part  II.  of  this  report. 
At  all  events,  it  is  no  better  for  the  State  to  leave 
its  citizens  at  the  mercy  of  the  large  corporations 
created  by  other  less  careful  sovereignties,  than  to 
permit  the  organization  of  corporations  adequate 


on  Corporation  Laws.  25 

to  the  demands  of  modern  business  under  its  own 
laws,  subject  to  its  own  more  careful  regulation 
and  control.  Under  our  State  and  Federal  system 
it  is  practically  impossible  for  any  one  State,  by  its 
own  laws,  to  control  foreign  corporations,  but  so~ 
far  as  possible  at  present  the  committee  has  sought 
to  subject  them  to  the  same  safeguards  of  reason- 
able publicity  and  accurate  returns,  both  as  to  organ- 
ization and  annual  condition,  as  the  State  requires 
of  its  own  corporations.  The  simple  requirement  of 
an  annual  excise  tax,  based  on  the  capitalization 
of  such  foreign  corporations,  will  serve  to  bring 
them  under  the  control  of  this  State  and  the  way 
will  be  open  for  their  further  regulation  if  desirable. 
This  annual  tax  has  been  levied  upon  the  same 
principle  as  the  corresponding  tax  paid  by  home 
corporations.  The  State  should  impose  no  greater 
burden  on  foreign  corporations  than  on  its  own, 
but  should,  so  far  as  possible,  subject  them  to  its 
own  laws. 

The  recommendations  of  the  committee  have, 
therefore,  been  controlled  by  three  principles,  which 
maybe  summarized  as  follows:  — 

First.  —  The  relation  of  the  State  to  the  corpora- 
tion. 

The  committee  would  repeat  its  opinion  that,  so 
far  as  purely  business  corporations  are  concerned, 
and  excluding  insurance,  financial  and  public  service 
corporations,  the  State  cannot  assume  to  act,  directly 
or  indirectly,  as  guarantor  or  sponsor  for  any  organ- 
ization under  corporate  form.  It  can  and  should 
require  for  itself  and  for  the  use  of  all  persons  inter- 


26  Report  of  Committee 

ested  in  the  corporation,  the  fullest  and  most  detailed 
information,  consistent  with  practical  business  meth- 
ods, as  to  the  details  of  its  organization,  the  powers 
and  restrictions  imposed  upon  its  stockholders  and 
as  to  the  property  against  which  stock  is  to  be  or  has 
been  issued.  Provision  is,  therefore,  made  in  the  law 
drafted  by  the  committee  for  the  organization  of  such 
corporations  for  any  lawful  purpose  other  than  for 
such  purposes  as  the  manufacture  and  distilling  of 
intoxicating  liquors  or  the  buying  and  selling  of  real 
estate  which  it  has  been  the  consistent  policy  of  the 
Commonwealth  to  except  from  incorporation  under 
the  general  law.  Any  desired  capitalization  above  a 
minimum  of  one  thousand  dollars  may  be  fixed. 
Capital  stock  may  be  paid  for  in  cash  or  by  property. 
If  it  is  paid  for  in  cash,  it  may  be  paid  for  in  full  or 
by  instalments  and  a  machinery  has  been  created  for 
protecting  the  corporation  against  the  failure  of  the 
subscribers  to  stock  to  pay  the  balance  of  their  sub- 
scriptions. If  stock  is  paid  for  by  property,  the 
incorporators  and  not  the  State  are  to  pass  upon  its 
value.  Before  any  stock,  however,  can  be  issued  for 
property,  a  description  of  the  property  sufficient  for 
purposes  of  identification,  to  the  satisfaction  of  the 
Commissioner  of  Corporations,  must  be  filed  in  the 
office  of  the  Secretary  of  the  Commonwealth.  This 
document  becomes  a  public  record  and  may  be*  con- 
sulted by  any  one  interested  in  the  corporation.  If 
the  officers  of  a  corporation  make  a  return  which  is 
false  and  which  is  known  to  be  false,  they  are  liable 
to  any  one  injured  for  actual  damages.  If  a  full  and 
honest  description  is  made  of  property  against  which 
stock  is  issued,  a  stockholder  cannot  complain  because 


on  Corporation  Laws.  27 

of  his  failure  to  inform  himself  by  personal  examina- 
tion or  investigation  of  the  value  of  the  property  in 
which  he  is,  or  contemplates  becoming,  an  investor. 

Second.  —  Duties  of  the  State  in  regulating  the  re- 
lations between  the  corporation  and  its  officers  an4 
stockholders. 

The  second  principle  upon  which  the  committee 
has  acted  in  its  specific  recommendations  is  this :  that 
the  State  should  permit  the  utmost  freedom  of  self- 
regulation  if  it  provides  quick  and  effective  machinery 
for  the  punishment  of  fraud,  and  gives  to  each  stock- 
holder the  right  to  obtain  the  fullest  information  in 
regard  to  his  own  rights  and  privileges  before  and 
after  he  becomes  the  owner  of  stock. 

Upon  this  theory  the  committee  has  recommended 
a  law  which  permits  the  corporation  to  determine  the 
classes  of  its  stock  and  the  rights  and  liabilities  of  its 
stockholders.  The  recommended  law  provides  for 
increasing  or  decreasing  the  amount  of  capital  stock 
upon  the  affirmative  vote  of  a  majority  of  its  stock- 
holders. For  the  protection  of  a  minority  interest  of 
stockholders  it  requires  a  two-thirds  vote  to  change 
the  classes  of  capital  stock  or  their  voting  power,  to 
change  the  corporate  name  or  the  nature  of  the  busi- 
ness of  the  corporation,  or  to  authorize  a  sale,  lease 
or  exchange  of  its  property  or  assets. 

Directors  are  made  liable,  jointly  and  severally, 
for  actual  damages  caused  by  their  fraudulent  acts, 
but  no  director  is  made  so  liable  unless  he  concurs 
in  the  act  and  has  knowledge  of  the  fraud.  The  lia- 
bility of  stockholders  is  limited  to  the  payment  of 
stock  for  which  they  have  subscribed,  to  debts  to 
employees,  and  in  cases  of  a  reduction  of  capital 


28  Report  of  Committee 

when  they  concur  in  the  vote  authorizing  a  distribu- 
tion of  assets  which  results  in  the  insolvency  of  the 
corporation.  An  attempt  has  been  made  to  give  to 
the  stockholder  an  opportunity  of  securing  for  him- 
self the  fullest  information  on  all  points  touching  his 
interest. 

Third.  —  The  relation  of  the  State  to  foreign  cor- 
porations. 

The  committee  has  been  guided  upon  this  sub- 
ject by  the  theory  that  the  treatment  of  foreign 
corporations  by  the  Commonwealth  should,  so  far  as 
practicable,  be  the  same  as  of  its  own,  particularly  so 
far  as  concerns  the  liabilities  of  officers  and  stock- 
holders, the  statements  filed  with  the  State  authori- 
ties for  the  information  of  stockholders  or  others  as 
to  their  capitalization  and  the  methods  adopted  of 
paying  in  their  stock,  and  the  annual  reports  of  con- 
dition required  for  taxation  purposes  or  otherwise. 
On  the  same  principle  a  nominal  franchise  tax  is 
annually  imposed  corresponding  to  the  tax  imposed 
by  the  State  on  its  own  corporations  and  made  ap- 
proximately proportional  in  amount. 

4.  ARRANGEMENT  AND  APPLICATION  OF  PROPOSED 

LEGISLATION. 

The  separation  of  those  statutes  applicable  gen- 
erally to  all  corporations  in  chapter  109  of  the 
Revised  Laws  from  the  provisions  governing  manu- 
facturing corporations  contained  in  chapter  110, 
while  perhaps  historically  necessary  has,  it  is  be- 
lieved, resulted  in  some  inconvenience  and  confusion. 
The  provisions  regulating  the  taxation  of  corpo- 
rations are  included  with  so  large  a  volume  of  other 


on  Corporation  Laws.  29 

legislation  on  the  general  subject  of  taxation  in 
chapters  12  and  14  as  to  make  it,  in  effect,  im- 
possible for  a  layman  and  difficult  for  a  lawyer  to 
determine  their  application. 

It  has  been  the  purpose  of  the  committee  te- 
draft  a  law  which  will  include  every  statutory  pro- 
vision regulating  the  organization,  conduct  and 
taxation  of  all  corporations  within  the  scope  of  its  \ 
inquiry,  whether  organized  under  the  laws  of  this 
Commonwealth  or  of  other  States.  The  recom- 
mended law  is,  therefore,  a  code  complete  in  itself. 
Effort  has  been  made  to  group  the  sections  under 
convenient  sub-titles,  arranged  in  logical  order, 
covering  the  life  of  a  corporation  from  its  organ- 
ization to  its  dissolution.  The  subjects  of  "Foreign 
Corporations,"  "  Taxation,"  "  Organization  and  Filing 
Fees"  and  u  Miscellaneous  Provisions"  are  treated 
in  the  order  named  at  the  end. 

The  committee  has  one  recommendation  .to  urge  in 
connection  with  the  application  of  the  corporation 
law  which  it  has  drafted.  There  are  certain  of  its 
provisions  regulating  the  transfer  of  stock  which,  it 
is  believed,  should  be  extended  to  public  service, 
insurance  and  banking  organizations.  While  the 
committee  has  no  authority  to  draft  legislation  relat- 
ing to  corporations  of  these  classes,  it  has  prepared  a 
supplementary  act,  which  constitutes  Appendix  C, 
extending  to  all  corporations  organized  under  the 
general  or  special  laws  of  the  Commonwealth  the 
provisions  referred  to  above.  In  the  opinion  of 
the  committee,  a  uniform  law  governing  the  transfer 
of  stock  of  all  classes  of  corporations  is  essential. 


PART  II. 


TAXATION  OF   CORPORATIONS. 


1.     INTRODUCTION. 

The  committee  is  charged  with  the  duty  of  exam- 
ining the  laws  of  the  Commonwealth,  especially  in 
respect  to  matters  of  taxation,  and  with  this  end  in 
view  has  not  only  carefully  studied  the  law  and  its 
effect  upon  existing  corporations,  but  has  examined 
witnesses  upon  this  point,  representative  business 
and  professional  men  who  have  a  practical  and  ex- 
pert knowledge  upon  the  subject.  There  is  substan- 
tial agreement  in  the  conclusion  that  the  existing 
law  governing  the  taxation  of  corporations,  par- 
ticularly manufacturing  and  trading  corporations,  is 
so  burdensome  upon  certain  classes  of  these  cor- 
porations that  they  are  in  many  cases  compelled 
to  organize  under  the  laws  of  other  States.  One 
of  the  purposes  for  which  this  committee  was  ap- 
pointed was  to  examine  and  consider  the  laws  of 
the  Commonwealth  and  to  recommend  such  changes 
in  existing  laws  as  may  be  necessary  to  make  the 
relations  existing  between  the  Commonwealth  and 
the  corporations  more  advantageous  to  the  Com- 
monwealth and  to  the  public  interest.  With  this 
end  in  view  we  will  proceed  to  examine  the  law  as 
it  stands,  to  point  out  what  we  conceive  to  be  its 
defects  and  then  discuss  the  remedies  we  recommend. 


32  Report  of  Committee 

a.  Taxation  of  Individuals. 

As  preliminary  to  this  investigation,  some  general 
consideration  of  our  tax  laws  as  affecting  individuals 
will  be  instructive. 

About  nine-tenths  of  all  of  the  direct  taxation  in 
Massachusetts  is  for  municipal  purposes,  and  the  re- 
maining one-tenth  for  State  and  county  purposes. 
Selecting  at  random  a  tax  bill  of  1901,  in  one  of  the 
largest  cities  of  the  Commonwealth,  we  find  the  city 
tax  to  have  been  $15.27,  the  county  tax  78  cents  and 
the  State  tax  35  cents,  making  the  total  rate  $16.40 
on  the  thousand.  In  addition  is  the  poll  tax,  $1  of 
which  goes  to  the  State  and  $1  to  the  county.  And 
in  accordance  with  the  terms  of  chapter  12,  section  2 
of  the  Eevised  Statutes,  "All  property,  real  and 
personal,  situated  within  the  commonwealth,  and  all 
personal  property  of  the  inhabitants  of  the  common- 
wealth wherever  situated,  unless  expressly  exempted 
by  law,  shall  be  subject  to  taxation." 

The  details  for  the  return  of  property  are  con- 
tained in  section  42  of  chapter  12.  It  is  not  impor- 
tant to  enter  minutely  into  a  consideration  of  these 
details,  but  merely  to  note  that  the  individual  is  liable 
to  taxation  upon  cash  on  hand  May  1,  debts  due 
from  others,  deposits  in  banks,  stock  in  trade  within 
or  without  the  State,  machinery  and  implements  of 
trade,  shares  in  all  incorporated  cotnpanies,  except- 
ing Massachusetts  corporations  and  national  banks, 
wherever  located, — all  other  personal  property  which 
has  not  been  specifically  exempted  by  law  from  taxa- 
tion. While  it  is  provided  by  law  that  from  debts 


on  Corporation  Laws.  33 

due  from  persons,  copartnerships  and  corporations 
there  may  be  deducted  debts  legally  due  by  the  tax 
payer  on  May  1,  it  should  be  noted  that  no  debt  or 
liability  of  an  individual  as  member  of  a  firm  can  be 
thus  deducted. 

Restricting  ourselves  now  to  the  consideration  of 
manufacturing  property,  it  should  be  noted  that  the 
individual  or  partnership  is  taxable  in  Massachusetts 
on  all  real  estate  within  the  State  and  on  all  per- 
sonal property  within  or  without  the  State,  and  as 
to  property  within  the  State  it  may  be  noticed  that 
stock  in  trade  is  taxed  where  the  business  is  carried 
on.  Without  regard  to  the  residence  of  the  owner 
or  the  place  where  the  goods  may  be,  it  is  taxable 
where  the  owners  "  hire  or  occupy  manufactories, 
stores,  shops."  These  provisions  do  not  apply  to 
stock  in  trade  owned  by  Massachusetts  corporations. 
Machinery,  like  real  estate,  whether  owned  by  in- 
dividuals or  corporations,  is  assessed  where  it  is 
situated. 

Perhaps  enough  has  been  said  for  our  purpose 
concerning  the  taxation  of  individuals. 

5.  Limits  of  Investigation. 

It  should  be  remembered  that  by  the  terms  of  the 
act  under  which  this  committee  was  created,  munici- 
pal, banking  and  public  service  corporations  are  in 
terms  excluded  from  consideration.  This  would  at 
once  remove  banks,  savings  banks,  trust  companies, 
railroads,  street  railways,  telephone  and  telegraph, 
gas,  electric  light  and  power  companies  and  others 
of  a  kindred  nature.  Insurance  companies  are 


34  Report  of  Committee 

within  the  scope  of  our  inquiry,  but  as  no  change 
is  recommended  in  the  law  affecting  them  no  further 
reference  will  be  made  to  them,  at  least,  in  this  part 
of  our  report,  and  inasmuch  as  the  criticisms  of  our 
present  laws  are  almost  exclusively  of  the  law  gov- 
erning the  taxation  of  manufacturing  and  trading 
corporations,  we  propose  in  examining  the  law  and 
its  workings  to  consider  particularly  this  class  of 
corporations,  which,  we  believe,  will  tend  to  a  clearer 
understanding  of  the  subject. 

c.  Historical  Summary  of  Leg  is  tat  ion. 

Before  1864  there  was  no  attempt  to  tax  corporate 
franchises  as  such.  A  corporation  and  an  individual 
were  treated  alike  in  the  matter  of  taxation.  The 
shares  of  stock  of  a  corporation  were  assessed  to  the 
holders,  and  the  corporation  itself  was  taxed  by  the 
assessors  of  the  various  cities  and  towns  upon  its 
real  estate  and  machinery,  the  value  of  which  was 
deducted  from  the  total  value  of  the  stock,  before 
assessment  to  stockholders. 

Revised  Statutes  (1836),  chapter  7. 
General  Statutes  (1860),  chapter  11. 
Worcester  Mutual  Fire   Ins.  Co.  v.  City  of 
"Worcester,  7  Gushing,  600. 

The  Act  of  1864  (chapter  208)  marks  the  begin- 
ning of  the  present  system  of  taxation  of  corporate 
franchises.  This  act  provided  for  returns  by  the  city 
and  town  assessors  to  the  State  treasurer  of  the 
names  of  all  domestic  corporations  located  in  their 
several  cities  and  towns,  the  value  of  real  estate  and 
machinery  assessed  to  each  (section  1)  and  for  re- 


on   Corporation  T^aws.  35 

turns  by  the  corporation  of  the  names  and  addresses 
of  all  stockholders  and  the  true  market  value  of  the 
stock.  (Section  2.) 

After  deducting  from  the  total  value  of  its  capital 
stock  the  value  of  real  estate  and  machinery  so  ^s= 
sessed  and  returned,  each  corporation  was  required 
to  pay  to  the  State  a  tax  of  one  and  one-sixth  per 
cent,  upon  the  excess  value  of  its  capital  stock  thus 
ascertained.  (Section  5.) 

Provision  is  made  to  exempt  stockholders  from 
taxation  upon  capital  stock  assessed  to  the  corpora- 
tion. (Section  15.) 

The  leading  case  of  Commonwealth  v.  Hamilton 
Mfg.  Co.,  12  Allen,  298,  determined  the  constitu- 
tionality of  this  statute  and  decided  that  the  tax  in 
question  was  a  tax  ou  the  corporate  franchise  and  not 
upon  tangible  property. 

By  an  amendment  enacted  in  the  year  following 
the  passage  of  this  act  (Acts  of  1885,  chapter  283), 
the  amount  of  the  tax  to  be  paid  by  corporations  was 
amended  as  follows:  Instead  of  a  fixed  tax  of  one 
and  one-sixth  per  cent,  the  system  of  averaging  the 
tax  rates  of  all  the  cities  and  towns  as  at  present  in 
force  was  adopted. 

This  statute  (1865,  chapter  283)  without  important 
amendment  was  included  with  the  Public  Statutes 
(1882)  and  in  the  Revised  Laws  (1901). 

2.     STATEMENT  OF  PRESENT  LAW. 
a.  As  to  Foreign  Corporations. 

There  is  no  express  provision  for  the  taxation  of 
foreign  corporations,  but  they  are  taxed  in  the 


36  Report  of  Committee 

manner  as  individuals  under  the  general  revenue  law. 
The  law  provides  that "  all  property  real  and  personal 
situated  within  the  commonwealth,  and  all  personal 
property  of  inhabitants  of  the  commonwealth  wherever 
situated,  unless  expressly  exempted  by  law,  shall  be 
subject  to  taxation  "  (Revised  Laws,  chapter  12,  sec- 
tion 2).  There  is  a  further  provision  that  personal 
estate  for  the  purpose  of  taxation  shall  include,  among 
other  things,  goods,  chattels,  money  and  effects, 
wherever  they  are;  money  at  interest,  and  other  debts 
due  the  person  to  be  taxed  more  than  he  is  indebted 
or  pays  interest  for;  public  stocks  and  securities, 
railroad  bonds,  and  stocks  in  foreign  corporations 
(section  4).  It  is  also  provided  that  goods,  wares, 
merchandise,  and  other  stock  in  trade,  stock  employed 
in  the  business  of  manufacturing  or  of  the  mechanic 
arts,  and  machinery  employed  in  any  branch  of  manu- 
factures within  the  Commonwealth  shall  be  taxed 
where  they  are  located,  whether  the  owners  reside 
within  or  without  the  Commonwealth.  (Section  23.) 
The  legal  status  of  foreign  corporations  for  the 
purposes  of  the  general  property  tax  is  explained  in 
chapter  VI.,  Title  A  of  the  Digest  of  Corporation  Laws 
appended  to  this  report.  It  is  there  shown  that  as  a 
foreign  corporation  is  legally  a  non-resident,  and  as 
the  situs  of  intangible  property  follows  the-  residence 
of  the  owner,  only  its  tangible  property  within  the 
Commonwealth  may  be  taxed.  The  practical  effect 
of  this  is  to  limit  the  taxation  of  foreign  corporations 
to  their  real  estate,  machinery  and  merchandise, 
which,  by  the  terms  of  section  23,  are  expressly  made 
taxable  to  non-residents.  In  other  words,  foreign 


on   Corporation  Laws.  37 

corporations  are  taxed  as  individual  residents  of  the 
Commonwealth,  except  that  they  escape  taxation  on 
their  money,  credits  and  other  intangible  property, 
and  also  on  their  tangible  property  without  the  Com- 
monwealth. See  Boston  Investment  Co.  v.  Boston, 
158  Mass.  461,  and  cases  cited;  New  York  Biscuit 
Co.  v.  Cambridge,  161  Mass.  326. 

1).  'As  to  Domestic  Corporations. 

The  existing  legislation  governing  the  taxation 
of  domestic  corporations  is  as  follows  :  — 

Revised  Laws,  chapter  14  : 

SECTION  37.  Every  corporation  organized  under 
the  general  or  special  laws  of  the  commonwealth  for 
purposes  of  business  or  profit  having  a  capital  stock 
divided  into  shares  .  .  .  shall  annually,  between  the 
first  and  tenth  days  of  May  return  to  the  tax  com- 
missioner under  the  oath  of  its  treasurer,  a  complete 
list  of  its  shareholders,  their  residence,  the  number 
of  shares  belonging  to  each,  the  amount  of  the  capi- 
tal stock  of  the  corporation,  its  place  of  business  and 
the  par  value  and  market  value  of  the  shares  made 
up  as  of  said  first  day  of  May.  ...  It  shall  also  con- 
tain a  statement  in  detail  of  the  works,  structures, 
real  estate  and  machinery  owned  by  said  corporation 
and  subject  to  local  taxation  within  the  common- 
wealth, and  of  the  location  and  value  thereof  .  .  . 
also  .  .  .  the  value  and  location  of  all  works,  struc- 
tures, real  estate  and  machinery  owned  by  them 
and  subject  to  local  taxation  without  the  common- 
wealth. 

SECTION  38.     The  tax  commissioner  shall  ascer- 


38  Report  of  Committee 

tain  from  the  returns  or  otherwise  the  true  market 
value  of  the  shares  of  each  corporation  subject  to  the 
requirements  of  the  preceding  section  and  shall  esti- 
mate therefrom  the  fair  cash  value  of  all  said  shares 
constituting  its  capital  stock  on  the  preceding  first 
day  of  May,  which,  unless  by  the  charter  of  the  cor- 
poration a  different  method  of  ascertaining  such  value 
is  provided,  shall,  for  the  purposes  of  this  chapter  be 
taken  as  the  true  value  of  its  corporate  franchise. 
From  such  value  there  shall  be  deducted  .  .  . 

Third.  In  case  of  corporations  subject  to  the  re- 
quirements of  the  preceding  section  .  .  .  the  value 
as  found  by  the  tax  commissioner  of  their  real  estate 
and  machinery  subject  to  local  taxation  wherever 
situated  .  .  .  the  tax  commissioner  may  take  the 
value  at  which  such  real  estate  and  machinery  is 
assessed  at  the  place  where  it  is  located  as  the  true 
value,  but  such  local  assessment  shall  not  be  con- 
clusive of  the  true  value  thereof. 

Chapter  12,  section  93: 

Assessors  shall  annually,  on  or  before  the  first 
Monday  of  August,  return  to  the  tax  commissioner 
the  names  of  all  corporations  except  banks  of  issue 
and  deposit,  having  a  capital  stock  divided  into 
shares  ...  a  statement  in  detail  of  the  works,  struc- 
tures, real  estate  and  machinery  with  the  value  thereof 
on  the  first  day  of  May. 

Chapter  14,  section  40: 

Every  corporation  subject  to  the  provisions  of  sec- 
tion 37  shall  annually  pay  a  tax  upon  its  corporate 
franchise,  after  making  the  deductions  provided  for 


on  Corporation  Laws.  39 

in  section  38,  at  a  rate  determined  by  an  apportion- 
ment of  the  whole  amount  of  money  to  be  raised  by 
taxation  upon  property  in  the  commonwealth  during 
the  same  year  as  returned  by  the  assessors  of  the 
several  cities  and  towns  under  the  provisions  of  sec- 
tion 93  of  chapter  12  upon  the  aggregate  valuation 
of  all  cities  and  towns  for  the  preceding  year  as  re- 
turned under  sections  60  and  61  of  said  chapter. 

Section  23  of  chapter  12  of  the  Revised  Laws,  pro- 
viding for  the  assessment  of  all  personal  estate  to  its 
owner,  is  not  expressly  limited  in  the  case  of  corpora- 
tions to  the  taxation  of  real  estate  and  machinery 
otherwise  than  by  the  provisions  of  section  38  of 
chapter  14,  which  provides  for  the  deduction  of  the 
assessed  value  of  real  estate  and  machinery  by  the 
tax  commissioner  from  the  total  value  of  the  corporate 
franchise  as  determined  by  the  tax  commissioner;  in 
other  words  the  limitation  of  the  local  taxation  of 
corporations  to  real  estate  and  machinery  is  effected 
only  by  implication  from  the  provisions  of  section  38 
of  chapter  14  together  with  the  adjudication  of  the 
supreme  judicial  court. 

The  following  points  are  to  be  noted.  The  market 
value  of  the  shares  is  to  be  taken  as  the  true  value 
of  the  corporate  franchise.  The  real  estate  and  ma- 
chinery are  locally  taxed,  and  the  value  of  the  cor- 
porate franchise  less  the  value  of  real  estate  and 
machinery  whether  located  within  or  without  the  State 
and  known  as  corporate  excess  is  taxed  at  the  aver- 
age rate  of  taxation  in  the  Commonwealth  and  is  col- 
lected, in  the  first  instance,  by  the  treasurer  of  the 


40  Report  of  Committee 

Commonwealth.  Such  proportion  of  the  tax  as  cor- 
responds to  the  proportion  of  stock  owned  by  persons 
residing  in  the  Commonwealth  is  credited  and  paid 
to  the  several  cities  and  towns  where  such  share- 
holders resided  on  the  first  day  of  May  next  preceding. 
The  remainder  of  the  tax,  which  largely  represents  the 
shares  in  Massachusetts  corporations  owned  by  per- 
sons residing  outside  the  Commonwealth,  is  retained 
in  the  State  treasury. 

Perhaps  a  clearer  idea  may  be  gained  of  the  appli- 
cation of  the  law  if  we  illustrate  it  by  the  statement 
of  an  imaginary  corporation  whose  works  we  will 
assume  are  located  in  Springfield,  whose  capital  is 
$150,000  and  whose  statement  made  to  the  commis- 
sioner of  corporations  is  as  follows :  — 

ASSETS. 
Real  estate,     .        .  $50,000 


Machinery, 
Cash, 

Merchandise, . 
Accounts  receivable, 


30,00.0 
10,000 
60,000 
25,000 


$175,000 
LIABILITIES. 

Capital  stock, f  150,000 

Accounts  payable, 25,000 

$175,000 

In  the  absence  of  any  market  quotations  on  this 
stock  the  commissioner  would  naturally  assume  the 
value  of  the  corporate  franchise  to  be  the  net  assets, 
i.e.,  $150,000,  or  par,  and  the  tax  would  be  assessed 
as  follows:  We  will  assume  for  convenience  in  mak- 
ing the  computation  that  the  local  rate  and  average 


on  Corporation  Laws.  41 

rate  for  the  Commonwealth  are  the  same,  say  $16  per 
$1,000:  — 

Local  Tax: 

Real  estate, f  50,000 

Machinery, 30,000 

$80,000  at  $16,    $1,280 
Stale  Tax  : 
On  the  corporate  excess  of $70,000  at  $16,      1,140 

$2,420 

Assume  now  that  one-third  of  the  stockholders  live 
in  Springfield,  one-third  in  Pittsfield,  and  that  one- 
third  of  them  live  outside  of  the  State,  and  the  tax  on 
the  corporate  excess,  $1,140,  would  be  disposed  of  as 
follows:  $380  would  be  credited  to  Springfield,  $380 
would  be  credited  to  Pittsfield,  and  $380  would  be  re- 
tained in  the  State  treasury.  Springfield  has  already 
collected  the  tax  on  real  estate  and  machinery,  and, 
therefore,  the  ultimate  disposition  of  the  total  tax  will 
be  as  follows:  — 

Springfield  receives  tax  on  real  estate  and  machinery,        .  $1,280 

Also  one-third  of  corporate  excess,       .....  380 

fl,660 

Pittsfield  receives  one-third  corporate  excess,       .        .        .  380 

Commonwealth  retains  one-third  corporate  excess,      .        .  380 

$2,420 

As  a  practical  matter  it  will  happen  of  course  that 
the  average  rate  for  the  Commonwealth  is  greater  or 
less  than  that  of  the  city  or  town  where  a  proportion 
of  the  corporate  excess  may  go.  In  the  above  illus- 
tration we  have  assumed  that  the  value  of  the  cor- 
porate franchise  is  the  value  of  the  net  assets  for  the 


42  Report  of  Committee 

reason  that  the  stock  is  not  sold  in  the  market,  and 
hence  its  value  can  only  be  estimated  by  the  commis- 
sioner from  the  statement,  but  let  us  assume  that  the 
stock  is  sold  in  the  market  where  it  has  a  value  of 
$150  per  share,  then  the  tax  would  be  increased  as 
follows :  — 

The  value  of  the  corporate  franchise,  the  stock 
having  a  market  value  of  $150  per  share,  would  be 
$225,000.  The  local  tax  on  real  estate  and  machinery 
would  be  the  same  as  before,  i.e. :  — 

Local  Tax: 

Real  estate, ".  $50,000 

Machinery 30,000 

$80,000  at  $16,   $1,280 

But  this  amount  deducted  from  $225,000  leaves  for 
the  value  of  the  corporate  excess  $145,000,  so  that 
the  tax  would  be  made  up  as  follows:  - 

Local  tax,- ,  $80,000  at  $16,   $1,280 

State  tax,  .        .        .      • 145,000  at    16,     2,230 


$3,600 

The  tax  on  corporate  excess  and  the  total  tax  are 
increased  by  $1,180. 

On  the  other  hand,  suppose  that  the  stock  has  a 
well-established  market  value  of  $90  per  share,  the 
local  tax  on  real  estate  and  machinery  will  still  remain 
the  same,  but  the  value  of  the  corporate  franchise  is 
only  $135,000,  and  the  tax  would  therefore  be  made 
up  as  follows:  — 

Local  tax, $80,000  at  $16,   $1,280 

State  tax,  ........          55,000  at    16,        880 

$2,160 


on  Corporation  Laws.  43 

Perhaps  enough  has  been  said  upon  the  application 
of  the  law  in  the  cases  that  have  been  selected,  and 
these  are  illustrative  of  a  large  number  of  our  domes- 
tic corporations. 

In  order  to  ascertain  how  the  existing  law  affects 
Massachusetts  corporations,  the  commissioner  of  cor- 
porations in  response  to  the  request  of  the  committee 
has  prepared  a  statement  which  shows  that  the 
amount  of  capitalization  of  manufacturing  and  trad- 
ing corporations  organized  under  the  laws  of  this 
Commonwealth  is  $240,584,584.  The  tax  paid  locally 
by  these  corporations,  in  the  first  instance,  is  $3,006,- 
794.  The  corporate  excess  tax,  so-called,  collected 
in  the  first  instance  by  the  State,  amounts  to  $1,686,- 
577.  Of  this  amount,  $1,355,143  is  distributed  to 
various  localities  throughout  the  Commonwealth 
where  the  owners  of  the  shares  live,  and  $331,434, 
the  amount  of  the  tax  attributable  to  shares  owned 
by  those  living  outside  of  the  State,  is  retained  in  the 
State  treasury,  that  is  to  say,  under  our  existing  law, 
the  class  of  corporations  that  we  are  now  considering 
pays  in  the  first  instance  and  ultimately  to  localities 
within  the  State  $1,361,937,  and  to  the  Common- 
wealth $331,134,  making  a  total  tax  upon  these  cor- 
porations of  $4,693,371. 

If  these  corporations  were  taxed  in  the  same  way 
that  foreign  corporations  are  taxed,  that  is  to  say, 
on  real  estate  and  machinery  and  merchandise,  they 
would  pay  a  tax  to  localities  within  the  State  of 
$5,403,408.  In  other  words,  they  would  pay  in  this 
State  a  tax  $710,037  larger  if  they  were  foreign 
corporations  than  they  do  now  as  domestic  corpora- 
tions. 


44  Report  of  Committee 

The  value  of  merchandise  held  by  these  corpora- 
tions is  $143,604,029,  and  the  value  of  corporate 
excess  is  $104,238,639;  that  is  to  say,  the  value  of 
merchandise  exceeds  the  value  of  corporate  excess 
by  $39,365,390.  It  would  appear  then  that  under 
the  existing  law  our  Massachusetts  manufacturing 
and  trading  corporations,  taking  them  as  a  whole, 
are  not  taxed  excessively,  but  in  order  to  ascertain 
more  exactly  how  they  are  affected  by  the  existing 
law,  it  will  be  necessary  to  divide  them  into  three 
classes. 

First.  Corporations  whose  property  is  all  within 
the  State. 

(a)  The  value  of  whose  corporate  franchise  does 
not  exceed  the  value  of  real  estate,  machinery  and 
merchandise. 

(b)  The  value  of  whose  corporate  franchise  does 
exceed  the  value  of  real  estate,  machinery  and  mer- 
chandise. 

Second.  Corporations  whose  property  is  partly 
within  and  partly  without  the  State. 

Third.  Corporations  whose  property  is  entirely 
outside  the  State. 

3.    APPLICATION  OF  PRESENT  LAW. 

a.   Generally. 

Attention  is  here  called  to  the  relation  which  cor- 
porate excess  bears  to  the  value  of  other  items  in 
the  statements  of  Massachusetts  corporations. 

Capitalization. 

Total  number  of  companies  in  list,  2,045,     ....  $241,482,584 
Number  of  companies  whose  merchandise  exceeds  corpo- 
rate excess,  1,034,  152,819,006 


on  Corporation  IJCLIVS.  45 

Number  of  companies  whose  'merchandise  and  corporate 

excess  balance,  7, $56,500 

Number  of  companies  whose  corporate  excess  exceeds  the 
merchandise,  901, 76,951,078 

Number  of  companies  which  have  no  merchandise  or  cor- 
porate excess,  103,  11,656,000 

to  which  should  be  added  the  statement  that  24 
per  cent,  of  the  total  capitalization  of  manufactur- 
ing and  trading  corporations  is  of  corporations  in 
which  the  value  of  the  corporate  franchise  does  not 
exceed  the  value  of  real  estate  and  machinery. 


1).  To  corporations  whose  property  is  entirely  within 
the  Commonwealth  and  whose  corporate  fran- 
chise does  not  exceed  in  value  its  real  estate, 
machinery  and  merchandise. 

Confining  ourselves  then  to  a  consideration  of 
corporations  whose  property  is  all  within  the  State 
and  the  value  of  whose  corporate  franchise  does  not 
exceed  the  value  of  real  estate,  machinery  and  mer- 
chandise, it  appears  that  in  corporations  of  this  class 
the  merchandise  value  is  $113,654,957,  and  the  cor- 
porate excess  value  is  $46,054,678,  that  is  to  say, 
manufacturing  and  trading  corporations  now  organ- 
ized under  the  laws  of  Massachusetts,  the  value  of 
whose  corporate  franchises  does  not  exceed  the  value 
of  real  estate,  machinery  and  merchandise,  pay  under 
the  existing  law  a  tax  substantially  the  same  in 
amount  which  would  be  realized  if  the  tax  were 
levied  upon  the  assessed  value  of  the  real  estate, 
machinery,  and  something  over  40  per  cent,  of  the 
value  of  merchandise.  The  item  of  merchandise 
exceeds  in  value  the  item  of  corporate  excess  in 


46  Report  of  Committee 

1,034  corporations  of  the  2,015  corporations  in  the 
Commonwealth,  of  the  class  we  are  considering, 
having  a  capitalization  of  $152,819,006  of  a  total 
capitalization  of  $211,482,584,  that  is,  in  the  cases 
of  50  per  cent,  in  number  of  our  manufacturing  and 
trading  corporations,  and  63  per  cent,  of  capitaliza- 
tion, our  existing  laws  touching  the  matter  of  taxa- 
tion certainly  work  no  hardship.  This  is  also  true 
of  those  companies,  seven  in  number,  and  with  a 
capital  of  $56,500,  in  which  the  merchandise  and 
corporate  excess  balance,  and  of  the  103  companies, 
with  a  capitalization  of  $11,656,000,  which  have  no 
merchandise  or  corporate  excess. 

c.  To  corporations  whose  property  is  entirely  within 
the  Commonwealth  and  wlwse  corporate  fran- 
chise does  exceed  in  value  its  real  estate,  ma- 
chinery and  merchandise. 

We  now  proceed  to  consider  those  Massachusetts 
corporations,  the  value  of  whose  corporate  franchise 
does  exceed  the  value  of  real  estate,  machinery  and 
merchandise.  Of  these  corporations  there  are  901, 
with  a  capitalization  of  $76,951,078,  in  which  the 
value  of  corporate  excess  exceeds  the  value  of  mer- 
chandise, that  is  in  number  44  per  cent.,  and  in  capi- 
talization 32  per  cent,  of  the  manufacturing  and 
trading  corporations  in  this  Commonwealth.  On 
this  class  of  corporations  our  present  tax  law  ap- 
pears to  bear  heavily  in  comparison  with  the  tax 
which  would  be  imposed  in  Massachusetts  were  their 
property  held  by  foreign  corporations.  An  examina- 
tion of  the  returns  of  these  corporations  discloses 


on  Corporation  Laws.  47 

the  fact  that  the  value  of  the  corporate  franchise  is 
$100,009,842,  of  real  estate  and  machinery  $41,- 
825,881,  and  of  merchandise  $29,949,072.  Assum- 
ing, for  convenience  in  figuring,  that  the  local  and 
State  rate  are  the  same,  i.  e.y  $16  a  thousand,  thesrs 
corporations  pay  under  the  existing  law  a  tax  of 
$1,600,157,  while  as  foreign  corporations  they  would 
pay  a  tax  of  $1,148,399,  that  is  to  say,  under  foreign 
charters  these  corporations  would  pay  a  tax  $456,810 
less  than  under  Massachusetts  charters. 

Continuing  our  examination  of  the  class  of  cor- 
porations liable  to  larger  taxation  under  a  Massachu- 
setts than  under  a  foreign  charter,  take  the  case  of 
a  corporation  liable  to  a  large  franchise  tax  because 
of  great  earnings  and  of  the  high  valuation  which  the 
incorporators  choose  to  put,  say,  upon  its  patent 
property. 

The  condition  of  such  a  company  might  be  fairly 
expressed  by  the  following  statement:  — 

ASSETS. 

Real  estate, 8500,000 

Machinery, 1,000,000 

Cash, 500,000 

Merchandise, 1,500,000 

Accounts  receivable, 2,000,000 

Patents,                                                                                              ,  4,000,000 


$9,500,000 
LIABILITIES. 

Capital  stock, $6,000,000 

Accounts  payable, 500,000 

Surplus, 3,000,000 


$9,500,000 


It  will  be  noticed  that  a  valuation  of  $4,000,000  is 
put  upon  the  patents  held  by  this  company.     Per- 


48  Report  of  Committee 

haps  they  have  not  cost  $4,000,  but  the  earning 
capacity  of  the  company  to  which  they  largely  con- 
tribute will  warrant  putting  upon  them  a  valuation 
of  $4,000,000.  The  question  as  to  what  jurisdiction 
this  company  shall  be  incorporated  under  being 
raised,  it  is  discovered  that  as  a  foreign  corporation 
the  tax  in  Massachusetts  would  be  based  upon  the 
following  valuation :  — 

Real  estate, $500,000 

Machinery, 1,000,000 

Merchandise,      ....  ...     1,500,000 


13,000,000 

and  at  $16  per  thousand,  the  tax  would  be  say 
$48,000. 

It  is  to  be  understood  that  this  corporation  is  one  in 
which  all  the  real  estate  and  machinery  is  in  Massa- 
chusetts, and  is  one  which  would  ordinarily  incorpo- 
rate under  the  laws  of  Massachusetts  were  it  not  for 
the  fact  that  the  tax  under  our  law  would  be  so 
great. 

Assume  now  that  this  company  were  organized  as 
a  Massachusetts  corporation,  and  assume  the  local 
and  State  rate  to  be  the  same,  say  $16  per  thousand, 
the  tax  would  be  as  follows :  — 

1.  Where  the  stock  is  not  sold  in  the  market  and 
its  value  must  be  determined  by  the  tax  commissioner 
from  the  annual  statement  which  is  rendered. 

In  this  case  it  will  be  noticed  from  the  statement 
that  the  stock  is  worth  the  net  assets,  namely,  $9,- 
500,000;  less  accounts  payable,  $500,000;  that  is, 
$9,000,000,  or  $150  per  share. 


on  Corporation  Laws.  49 

The  tax  would  therefore  be  as  follows :  — 

Local  Tax: 

Real  estate, f  500,000 

Machinery, 1,000,000 

$1,500,000,  at  f  16,     f  24,000 
State  Tax: 
On  the  corporate  excess,     .  7,500,000,  at    16,     120,000 


Total, '  .   f  144,000 

or  $96,000  more  than  the  corporation  would  pay  in 
Massachusetts  if  it  were  incorporated  under  the  laws 
of  another  State. 

2,  But  let  us  suppose  that  the  shares  of  this  cor- 
poration are  dealt  in  in  the  open  market,  and  that  the 
stock  pays  12  per  cent,  dividends  and  is  quoted  at 
$200  a  share,  then  were  this  a  Massachusetts  corpora- 
tion the  tax  would  be  as  follows :  — 


Value  of  stock, f  12,000,000 

Subject  to  local  taxation,     ....       1,500,000,  at  f  16,     $24,000 
State  tax  on  corporate  excess,     .        .        .     10,500,000,  at   16,     168,000 

$192,000 


which  is  $144,000  a  year  more  than  this  corporation 
would  be  taxed  in  Massachusetts  if  it  were  organized 
under  the  laws  of  another  State.  Of  course  it  is  true 
that  if  the  corporation  were  organized  under  the  laws 
of  the  State  of  Massachusetts  the  shareholders  would 
not  be  liable  to  be  taxed  upon  their  holdings  of  stock, 
but  property  of  this  sort  so  readily  escapes  taxation, 
that  the  exemption  of  shareholders  is,  as  a  matter 
of  practice,  in  many  cases  not  thought  to  com- 
pensate for  the  very  large  increase  in  tax  to  which 


50  lleport  of  Committee 

the  Massachusetts  corporation  of  this  class  is  sub- 
ject, and  it  will  be  noted  that  in  the  last  case 
considered  where  the  stock  is  quoted  in  the  market 
at  $200  per  share,  and  the  value  of  the  corporate 
franchise  is  therefore  fixed  at  $12,000,000,  there 
are  but  $9,000,000  of  assets,  of  which  $4,000,000 
is  the  valuation  put  upon  the  patents.  Our  con- 
clusion, therefore,  is  that  corporations  whose  property 
is  all  within  the  State,  the  value  of  whose  corporate 
franchise  would  exceed  the  value  of  real  estate,  ma- 
chinery and  merchandise,  are  at  a  disadvantage  as 
regards  taxation  as  compared  with  foreign  corpora- 
tions holding  the  same  property  in  Massachusetts. 

d.   To  securities  holding  corporations. 

A  class  of  corporations  which,  because  of  taxation, 
cannot  exist  under  a  Massachusetts  charter,  and 
which  we  refer  to  now  as  a  matter  of  convenience, 
is  the  securities  holding  corporation,  which  is  a  cor- 
poration organized  solely  for  the  purpose  of  holding 
stock  in  other  corporations.  To  illustrate  the  work- 
ings of  our  law  in  a  case  of  this  sort,  let  us  turn 
to  the  above  statements  and  assume  that  there  are 
two  Massachusetts  corporations  which  make  exactly 
this  same  statement,  and  that  it  is  proposed  to 
organize  a  third  simply  for  the  purpose  of  holding 
the  stock  in  the  other  two.  Let  us  call  the  two  con- 
stituent corporations  A  and  B  respectively,  and  the 
securities  holding  corporation  C.  The  statement 
above  indicates  that  the  value  of  the  net  assets  make 
the  stock  worth  $150  a  share,  on  which  we  have 
seen  the  corporation  pays  a  tax  of  $144,000,  assum- 


off  Corporation  Laws.  51 

ing  the  local  and  State  rate  to  be  the  same.  Corpora- 
tion B,  having  exactly  the  same  statement,  has  been 
taxed  the  same  amount,  $144,000,  making  the  total 
tax  on  the  two  corporations,  local  and  State, 
$288,000.  Corporation  C  holds  all  the  stock  iiT 
both  corporations,  which  at  par  is  worth  $18,000,000, 
and  under  the  existing  law  Corporation  C  would  be 
taxable  on  $18,000,000,  less  the  amount  of  machinery 
and  real  estate  held  locally ;  but  the  securities  hold- 
ing company  has  no  machinery  and  no  real  estate, 
both  of  which  are  held  by  the  constituent  companies, 
so  that  the  combined  tax  of  the  three  corporations 
which  eventually  falls  upon  the  securities  holding 
corporation  is  as  follows :  — 

Corporation  A, f  144,000 

Corporation  B,  . 144,000 

Corporation  C, 288,000 


$576,000 

levied  on  the  property  held  by  A  and  B.  Of  course 
this  is  prohibitory,  and  still  more  so  in  case  the  stock 
were  valued  at  $200  per  share,  in  which  case,  — 

Corporation  A  would  pay  .         .......      f  192,000 

Corporation  H, 192,000 

Corporation  C, 384,000 


$768,000 

and  this  state  of  affairs  would  exist  under  our 
present  law  whether  the  stock  held  by  the  securities 
holding  corporation  were  the  stock  of  Massachusetts 
corporations  or  of  corporations  organized  under  the 
laws  of  another  State.  In  the  event  that  the  securi- 
ties holding  corporation  were  organized-  under  the 


52 


Report  of  Committee 


laws  of  another  State,  for  example,  under  the  laws 
of  the  State  of  New  Jersey,  the  tax  would  be  as 
follows :  — 


Stock  $150. 

Stock  $200. 

A.  Massachusetts  Corporation  would  pay   . 
B.  Massachusetts  Corporation  would  pay    . 
C.  New  Jersey  Corporation  would  pay 

8144,000 
144,000 
4,35.0 

$192,000 
.    192,000 
4,350 

$292,350 

$388,350 

While  if  the  constituent  companies  as  well  as  the 
securities  holding  company  were  incorporated  under 
the  law  of  New  Jersey,  the  property  being  all  in 
Massachusetts,  the  tax  would  be  as  follows,  whatever 
might  be  the  value  of  the  shares :  — 


A.  New  Jersey  Corporation  would  pay 

B.  New  Jersey  Corporation  would  pay 

C.  New  Jersey  Corporation  would  pay 


$48,000 

48,000 

4,350 

$100,350 


e.   To  corporations  wliose  property  is  partly  within 

and  partly  without  the  Commonwealth. 
Considering  now  that  important  class  of  corpora- 
tions whose  property  is  partly  within  and  partly 
without  the  State:  It  is  quite  a  common  occurrence, 
as  business  is  now  conducted,  for  a  manufacturing 
corporation  to  have  its  works  located  in  more  than 
one  State.  For  example  —  Massachusetts  individuals 
may  wish  to  organize  a  corporation  owning  works  in 
two  or  three  States.  They  are  prevented  from  or- 
ganizing under  a  Massachusetts  charter  by  the  fact 


on  Corporation  Laws.  53 

that  in  determining  the  value  of  the  corporate  fran- 
chise for  purposes  of  taxation,  the  Commissioner  of 
Corporations,  under  our  existing  law,  can  deduct 
only  the  valuation  of  real  estate  and  machinery  out- 
side of  the  State.  The  very  considerable  item  oT^ 
merchandise  is  taxable  in  the  foreign  jurisdiction  and 
again  in  Massachusetts,  as  part  of  the  corporate  ex- 
cess, and  this  would  be  true  of  any  other  species  of 
property,  excepting  real  estate  and  machinery,  tax- 
able in  the  foreign  jurisdiction,  although  it  is  the 
general  rule  in  all  the  States  that  only  tangible  per- 
sonal property  owned  by  non-residents  is  taxable. 
The  committee  feels  that  some  relief  should  be 
afforded  corporations  of  this  type  by  allowing  the 
Commissioner  of  Corporations,  in  determining  the 
value  of  the  corporate  franchise  for  the  purpose  of 
taxation,  to  deduct,  with  certain  exceptions,  all  prop- 
erty situated  in  another  State  or  country  and  subject 
to  taxation  therein. 

It  has  been  suggested  that  our  Massachusetts  cor- 
porations should  be  taxed  as  individuals  are,  but  an 
examination  of  the  law  of  this  State  governing  the 
taxation  of  individuals,  which  has  been  referred  to 
above,  indicates  that  this  would  afford  no  relief. 
Unlike  the  Massachusetts  corporation  the  individual 
would  be  taxed  here  on  all  property  held  by  him 
outside  the  State  excepting  real  estate,  and  the  Mas- 
sachusetts resident  is  at  a  great  disadvantage  as  com- 
pared with  the  foreign  corporation  holding  the  same 
kind  and  amount  of  property  and  distributed  in  like 
manner.  For  example,  take  an  instance  of  manufac- 
turing property  under  one  ownership,  located  in 


54  Report  of  Committee 

Massachusetts  and  two  other  States.  In  a  case 
before  us  if  this  property  were  held  by  a  Massachu- 
setts corporation  the  tax  in  Massachusetts  would  be 
$32,360,  if  held  by  a  foreign  corporation  $11,326,  if 
held  by  a  Massachusetts  individual  resident  $10,450. 

f.  To  corporations  whose  property  is  wholly  without 
the  Commonwealth. 

If  our  present  tax  law  is  a  burden  upon  corpora- 
tions whose  property  is  partly  within  and  partly  with- 
out the  State,  it  beaf's  with  still  greater  severity,  and 
is  indeed  prohibitive  upon  corporations  whose  prop- 
erty is  all  without  the  State.  For  example:  — 

A  great  deal  of  Massachusetts  capital  is  invested 
in  mining  properties  located  of  necessity  in  other 
States.  Such  corporations  cannot  operate  under 
Massachusetts  charters.  Under  our  existing  law  re- 
lating to  such  corporations  it  is  provided  that  there 
shall  be  paid  a  semi-annual  tax  of  one-twentieth  of 
one  per  cent,  upon  the  par  value  of  the  capital  stock, 
and  four  per  cent,  per  annum  upon  the  net  profits  for 
the  year.  For  example,  a  mining  company  with  a 
capital  stock  of  $20,000,000  and  a  net  annual  profit 
of  $2,000,000  must  pay  a  yearly  tax  of  $100,000. 

This  is  prohibitive,  but  if  mining  companies  could 
organize  under  the  existing  general  law  the  tax 
would,  in  most  cases,  still  be  prohibitive. 

Take,  for  instance,  the  following  statement  of 
assets  and  liabilities  in  the  case  of  the  mining  com- 
pany which  we  used  as  an  illustration  above:  — 


on  Corporation  Laivs.  55 


ASSETS, 
Real  Estate  : 

Land,  etc.,    .,.,,.,..  $20,000,000 

Buildings, 2,000,000 

Machinery, 5,000,000 

Cash  and  debts  receivable,     .         .         .         .         .         .         .  1,000,000 

Merchandise 500,000 

Patents, 

Other  assets, 1,000,000 


$29,500,000 
LIABILITIES. 

Capital  stock, $20,000,000 

Debts, 500,000 

Surplus, 9,000,000 

$29,500,000 

Assume  that  this  company  could  organize  under 
the  general  Massachusetts  law  as  it  exists  to-day;  that 
its  capital  is  invested  in  lands,  machinery,  stocks  of 
copper,  etc.,  in  Michigan,  and  that  the  stock  is  selling 
at  $200  per  share.  The  value  of  the  corporate  fran- 
chise is  thus  $40,000,000.  Deduct  the  value  of  the 
real  estate  and  machinery  in  Michigan,  and  a  tax 
must  be  paid  in  Massachusetts  on  $13,000,000,  say 
$208,000,  which  the  corporation  escapes  by  organiz- 
ing under  the  laws  of  another  State. 

Or,  suppose  that  Massachusetts  capitalists  desire 
to  engage  in  the  steel  business  in  Pennsylvania. 
Under  a  Massachusetts  charter  they  can  deduct  the 
value  of  their  real  estate  and  machinery  in  Pennsyl- 
vania from  the  value  of  the  corporate  franchise,  but 
on  the  balance  they  must  pay  a  tax  which  they  escape 
if  operating  under  a  foreign  charter.  For  example: 
Suppose  they  have  a  capital  of  $5,000,000,  and  that 
the  stock  sells  at  par.  The  value  of  the  corporate 
franchise  is  $5,000,000.  Suppose  that  the  investment 


56  Report  of  Committee 

in  real  estate  and  machinery  in  Pennsylvania  is  $2,- 
000,000.  This  can  be  deducted  from  the  $5,000,000 
value  of  the  corporate  franchise,  and  the  corporation 
must  pay  a  tax  of  say  $48,000  in  Massachusetts  on 
the  balance,  $3,000,000,  of  the  value  of  the  corporate 
franchise,  which  it  escapes  if  organized  under  the 
laws  of  another  State. 

There  is  one  practice  open  to  Massachusetts  cor- 
porations, and  availed  of  to  a  greater  or  less  extent, 
which  enables  them  to  reduce  the  value  of  their  cor- 
porate franchise,  and  hence  the  amount  of  their  taxa- 
tion, and  this  is  the  creation  of  obligations,  either  in 
the  form  of  floating  or  bonded  indebtedness.  For 
example,  in  the  case  of  a  corporation  with  a  capital 
of  $1,000,000,  there  would  be  an  annual  saving  in 
taxation  of  over  $12,000  as  between  increasing  the 
capital  by  $750,000,  or  creating  indebtedness  of  a 
like  amount. 

The  effect  of  this  is  to  offset  tangible  property  by 
debts  due,  a  privilege  which  the  individual  does  not 
enjoy. 

It  may  be  suggested  that  domestic  corporations 
whose  merchandise  exceeds  in  value  the  value  of  the 
corporate  excess  ought  to  be  more  heavily  taxed  than 
under  the  existing  law,  in  other  words  that  corpora- 
tions should  at  least  pay  a  tax  on  the  value  of  their 
real  estate,  machinery  and  merchandise  within  the 
State.  This  matter  has  had  most  careful  considera- 
tion by  the  committee  but  the  figures  given  in  an 
earlier  part  of  the  report  indicate  that  if  such  a  change 
in  the  law  were  made  it  would  very  largely  increase 
the  tax  on  this  class  of  corporations  and  the  commit- 


on  Corporation  Laws.  57 

tee  is  of  the  opinion  that  while  as  an  economic  propo- 
sition this  increase  might  be  justified,  in  view  of  the 
fact  that  Massachusetts  manufacturers  are  now  labor- 
ing tinder  a  good  many  disadvantages  it  would  be 
unwise  to  further  increase  their  burdens.  The  com- 
mittee is  mindful  of  the  fact  that  in  certain  localities 
in  other  States  manufacturing  property  is  exempt 
from  taxation  for  a  certain  number  of  years  (see 
Digest  of  Corporation  Laws,  chapter  V.,  Title  E), 
and  that  other  inducements  are  held  out  to  incorpora- 
tion and  location  in  other  States.  It  is  clearly  more 
to  the  advantage  of  the  Commonwealth  to  have 
manufactories  located  within  the  State,  under  foreign 
incorporation,  than  to  increase  the  burdens  of  our 
manufacturers  to  an  extent  which  would  lead  them 
to  move  their  factories  out  of  the  Commonwealth, 
and  it  is  for  this  reason  that  the  committee  makes  no 
suggestion  that  the  tax  on  Massachusetts  corpora- 
tions should  be  increased. 

Nor  is  the  committee  disposed  to  recommend  any 
change  in  the  law  which  would  reduce  the  amount 
of  the  tax  received  from  the  901  corporations,  the 
value  of  whose  corporate  franchises  exceeds  the  value 
of  their  real  estate,  machinery  and  merchandise. 
These  corporations  are  now  operating  under  Massa- 
chusetts charters  and  are  probably  not  taxed  in  excess 
of  their  ability  to  pay.  If  the  law  were  so  changed 
that  the  value  of  their  corporate  franchises  for  pur- 
poses of  taxation  were  not  to  exceed  the  value  of 
their  real  estate,  machinery  and  merchandise,  in  other 
words,  if  they  were  taxed  as  foreign  corporations 
would  be  taxed  on  their  property  in  this  Common- 


58  Report  of  Committee 

wealth,  the  cities  and  towns  and  the  State  treasury 
would  lose  annually  about  $450,000  which  is  now 
collected. 

6.     STATEMENT  OF  RECOMMENDED  LEGISLATION. 

This  naturally  brings  us  to  a  consideration  of  the 
change  in  the  existing  tax  laws  of  this  Commonwealth 
recommended  by  the  committee.  The  committee  has 
deemed  it  unwise  to  propose  any  change  in  the  ma- 
chinery of  the  existing  law.  Domestic  corporations 
have  grown  accustomed  to  its  operation  and  have 
adjusted  themselves  to  it.  The  change  in  the  sub- 
stance of  the  law,  as  recommended  by  the  committee, 
is  embodied  in  the  draft  of  the  proposed  act  accom- 
panying this  report.  It  leaves  the  general  theory  of 
the  existing  law  unchanged,  but  it  provides  relief  for 
that  class  of  corporations  whose  property  is  partly 
within  and  partly  without  the  Commonwealth,  for 
that  class  of  corporations  whose  property  is  exclu- 
sively without  the  Commonwealth,  and  for  corpora- 
tions holding  securities  upon  which  a  Massachusetts 
citizen  would  not  be  taxable.  The  text  of  those  sec- 
tions of  the  recommended  law  which,  to  accomplish 
this  end,  have  been  redrafted  from  the  Revised  Laws 
with  important  changes  are  as  follows:  — 

SECTION  73.  (Compare  with  Revised  Laws,  chap- 
ter 14,  section  38.)  The  tax  commissioner  shall  annu- 
ally ascertain  from  the  returns  required  by  section 
forty-four  or  in  any  other  manner,  the  true  market 
value  of  the  shares  of  the  capital  stock  of  each  cor- 
poration which  is  subject  to  the  provisions  of  this 
act  and  shall  estimate  therefrom  the  fair  cash  value 


on  Corporation  Laws.  59 

of  all  of  the  shares  constituting  its  capital  stock  on 
the  preceding  first  day  of  May,  which  shall,  for  the 
purposes  of  this  act,  be  taken  as  the  true  value  of  its 
corporate  franchise.  From  such  value  there  shall  be 
deducted  the  value  as  found  by  the  tax  commissioner 
of  its  real  estate  and  machinery  within  the  common- 
wealth subject  to  local  taxation  and  of  securities 
which  if  owned  by  a  natural  person  resident  in  this 
commonwealth  would  not  be  liable  to  taxation;  also 
the  value  as  found  by  the  tax  commissioner  of  its 
property  situated  in  another  State  or  country  and 
subject  to  taxation  therein  excepting  securities  which, 
if  owned  by  a  natural  person  resident  in  this  Com- 
monwealth, would  be  liable  to  taxation.  For  the 
purposes  of  this  section  he  may  take  the  value  at 
which  such  real  estate  and  machinery  is  assessed  in 
the  city  or  town  where  it  is  situated  at  its  true  value, 
but  such  local  assessment  shall  not  be  conclusive  of 
its  value. 

SECTION  75.  (Compare  with  Revised  Laws,  chap- 
ter 14,  section  40.)  Every  domestic  corporation 
which  is  subject  to  the  provisions  of  this  act  shall 
in  each  year  pay  to  the  treasurer  and  receiver- 
general  a  tax  upon  the  value  of  its  corporate  fran- 
chise, after  making  the  deductions  provided  for  in 
section  seventy-three,  at  a  rate  determined  by  an 
apportionment  of  the  whole  amount  of  money  to  bo 
raised  by  taxation  upon  property  in  the  Common- 
wealth during  the  same  year  as  returned  by  the 
assessors  of  the  several  cities  and  towns  under  the 
provisions  of  section  ninety-three  of  chapter  twelve 
of  the  Revised  Laws,  after  deducting  therefrom  the 


60  Report  of  Committee 

amount  of  tax  assessed  upon  polls  for  the  preceding 
year,  as  certified  to  the  secretary,  upon  the  aggre- 
gate valuation  of  all  cities  and  towns  for  the  preceding 
year,  as  returned  under  sections  sixty  and  sixty-one 
of  said  chapter  of  the  Revised  Laws;  but  if  the  re- 
turn from  any  city  or  town  is  not  received  before  the 
twentieth  day  of  August,  the  amount  raised  by  taxa- 
tion in  said  city  or  town  for  the  preceding  year,  as 
certified  to  the  secretary  of  the  commonwealth,  may 
be  adopted  for  the  purpose  of  this  determination. 
But  the  total  amount  of  tax  to  be  paid  by  such  cor- 
poration in  any  year  upon  its  property  locally  taxed 
in  this  commonwealth  and  upon  the  value  of  its  cor- 
porate franchise  shall  amount  to  not  less  than  one- 
tenth  of  one  per  cent,  of  the  true  market  value  of  its 
capital  stock  at  the  time  of  said  assessment  as  found 
by  the  tax  commissioner. 

The  effect  of  this  change  in  the  existing  law  if 
adopted  would  be  to  leave  unaffected  the  tax  upon 
existing  corporations  whose  property  is  wholly  located 
within  the  Commonwealth,  excepting  to  the  limited 
extent  that  they  may  own  securities  not  taxable  to 
the  resident  individual.  Corporations  owning  prop- 
erty partly  within  and  partly  without  the  Common- 
wealth, as  well  as  those  whose  property  is  all  outside 
of  the  Commonwealth,  would  be  relieved  from  taxa- 
tion on  property  taxable  outside  the  State.  The 
minimum  limitation  of  $  1  per  thousand  upon  the 
market  value  of  the  shares  is  imposed  for  this  reason. 
If  it  did  not  exist  it  might  be  possible  to  organize  a 
Massachusetts  corporation  holding  property  exclu- 
sively outside  of  the  State  which  would  pay  no  tax 


on  Corporation  Laws.  61 

at  all  in  Massachusetts,  or  again,  securities  holding 
corporations  would  pay  no  tax  at  all  were  it  not  for 
the  minimum  limitation  here  proposed. 

Without  entering  upon  a  general  discussion  of  the 
question  of  whether  or  not  it  would  be  advantageous 
to  so  adjust  our  tax  laws  that  so-called  "  trusts  "  could 
incorporate  in  Massachusetts,  it  is  perhaps  enough  to 
say  here  that  the  committee  has  had  no  such  purpose 
in  view  in  suggesting  the  changes  embodied  in  the 
act  accompanying  this  report,  but  has  simply  at- 
tempted to  propose  a  general  corporation  law  for 
manufacturing  and  trading  corporations,  and  others 
of  a  kindred  nature,  which  will  enable  Massachusetts 
capital  to  conduct  anywhere  under  a  Massachusetts 
charter  any  business  permitted  by  the  terms  of  the 
act. 

All  of  the  so-called  "  trusts  "  are,  in  fact,  corpora- 
tions of  other  States  than  Massachusetts.  It  was 
clearly  no  part  of  the  committee's  duties  to  consider 
actual  or  possible  evils  caused  by  the  "  trusts "  or 
possible  remedies  therefor.  But  it  considers  that  the 
system  of  legislation  and  taxation  recommended  will 
be  an  improvement  on  existing  conditions.  The 
general  modern  tendency  is  to  avoid  giving  "  trusts  " 
or  any  corporations,  of  other  States,  any  large  privi- 
leges or  greater  freedom  from  control  than  is  con- 
ceded by  a  State  to  the  corporations  it  itself  creates. 
This  tendency  is  well  exemplified  in  the  constitutional 
provision  of  California  (Act  12,  Sec.  15)  :  "  No  cor- 
poration organized  outside  the  limit  of  this  State  shall 
be  allowed  to  transact  business  within  this  State  on 
more  favorable  conditions  than  are  prescribed  by  law 


62  Meport  of  Committee 

to  similar  corporations  organized  under  the  laws  of 
this  State;"  and  the  general  principle  seems  to  have 
been  ratified  by  the  United  States  Supreme  Court  in 
the  case  of  Pinney  v.  Nelson,  183  U.  S.  144.  It 
seems  clearly  to  be  worse  than  useless  for  a  State  to 
impose  stringent  regulations  to  protect  its  citizens 
from  any  possible  abuse  by  its  own  corporations 
while  not  subjecting  the  corporations  of  foreign  States 
to  any  sort  of  supervision  or  control.  The  commit- 
tee, therefore,  has  recommended  a  very  slight  excise 
or  franchise  tax  to  be  imposed  upon  such  foreign 
corporations  as  have  a  general  place  of  business  in 
the  State,  and  corresponding  to  the  tax  it  imposes,  in 
the  absence  of  taxable  property,  upon  its  own  corpo- 
rations, but  only  one-tenth  thereof  in  amount.  This 
excise  -tax  is  imposed  upon  its  own  corporations  for 
the  naked  privilege  of  the  corporate  franchise,  in 
cases  where  there  is  no  corporate  property,  to  con- 
tribute to  the  support  of  the  government,  and  it  is 
clearly  logical  to  impose  a  corresponding  tax  upon 
foreign  corporations  which  the  State  allows  to  do 
business  within  its  limits,  and  which  share  in  the 
protection  of  its  courts  and  laws  and  in  the  profit  of 
its  markets.  Such  an  excise  tax,  hardly  more  than  a 
license  fee,  is  imposed  as  part  of  the  machinery  of 
getting  proper  returns  from  such  corporations  corre- 
sponding to  the  returns  required  of  our  own  corpora- 
tions. Both  should  be  treated  alike,  and  it  would  be 
clearly  absurd  for  the  State,  after  subjecting  its  own 
corporations,  which  presumably  are  chartered  under 
laws  proper  for  the  protection  of  its  citizens,  to  its 
careful  supervision,  to  allow  its  whole  system  of  leg- 


on  Corporation  Laws.  63 

islation  to  be  evaded  by  the  simple  process  of  taking 
out  a  foreign  charter.  This  tax  may  be  abated  or 
removed  entirely  in  the  case  of  corporations  which 
have  actual  taxable  property  within  the  State,  and  is 
fixed  at  one-tenth  of  the  amount  of  the  excise  exacted 
from  home  corporations. 

As  bearing  upon  the  general  question  whether  or 
no  the  so-called  "  trusts  "  could  incorporate  in  Massa- 
chusetts under  our  proposed  amendment,  it  may  be 
instructive  to  take  the  United  States  Steel  Company 
as  an  illustration.  The  total  authorized  capital  stock 
of  this  company  is  $1,100,000,000,  of  which  one-half 
is  preferred  stock,  and  one-half  common  stock.  If 
all  the  stock  is  issued,  the  annual  tax  under  the  law 
of  New  Jersey  will  be:  — 

$1  per  $1,000  up  to  $3,000,000,  $3,000 

50  cents  per  $1,000  between  $3,000,000  and  $5,000,000,  ,  .  1,000 
$50  per  $1,000,000  over  $5,000,000, 54,750 


$58,750 

If  the  company  desired  to  incorporate  in  Massa- 
chusetts, the  value  of  the  corporate  franchise,  taking 
the  current  quotations  of  81  for  the  preferred  stock 
and  32  for  the  common  stock,  would  be  $621,500,000, 
and  the  minimum  tax  of  $1  per  thousand  would 
amount  to  $621,500  annually. 

%  That  our  present  corporation  laws  are  not  adapted 
to  modern  conditions  must  be  apparent  to  any  one 
who  studies  them.  In  the  following  table  Massachu- 
setts corporations  are  classified  as  to  capitalization, 
and  it  appears  that  there  are  none  with  a  capital  of 
over  $5,000,000,  and  only  four  with  a  capitalization 


64:  Report  of  Committee 

of  |3,000,000  and  over.  The  largest  per  cent,  of 
capitalization,  i.e.,  23  per  cent,  is  represented  by  69 
companies,  with  capitalizations  from  $500,000  to  $1,- 
000,000.  The  largest  number  of  corporations  is  723, 
with  capitalizations  varying  from  $5,000  to  $25,000, 
but  representing  only  4.4  per  cent,  of  the  total 
capitalization. 


on  Corporation  Laws. 


65 


Table  of  Massachusetts  Corporations. 


Class. 

Capital. 

No. 
Companies. 

Per  Cent  of 
Capital. 

15,000  and  under,     . 

$10,069,010 

273 

.4 

5,000  to     $25,000,  . 

10,802,165 

723 

4.4 

25,000  to       50,000,  . 

14,689,979 

363 

6.0 

50,000  to     100,000,  . 

24,755,610 

302 

10.2 

100,000  to     200,000,  . 

22,928,800 

139 

9.4 

200,000  to     500,000,  . 

52,369,420 

149 

21.6 

500,000  to  1,000,000,  . 

55,617,600 

69 

28.0 

1,000,000  to  2,000  ,000,  . 

23,220,000 

16 

9.6 

2,000,000  to  3,000,000,  . 

19,500,000 

7 

8.7 

3,000,000  to  4,000,000,  . 

7,500,000 

2 

3.1 

4,000,000  to  5,000,000,  . 

9,030,000 

2 

3.7 

$241,482,584 

2,045 

100.1 

UN,Vt 


rrv 


66 


Report  of  Committee 


Total  Yield  of  Taxes  collected  from  Corporations  of  All  Classes  for  the 
Years  following : 


Years. 

Net  Amount 
assessed. 

Amount  due  Cities 
and  Towns. 

Amount  accruing 
to 
Commonwealth. 

1885,      .... 

$1,961,959 

$1,484,971 

$476,988 

1886,      .... 

2,281,157 

1,724,070 

557,087 

1887,      .... 

2,983,333 

2,263,560 

719,773 

2,813,896 

2,136,196 

677,700 

1889,      .... 

2,850,099 

2,143,814 

706,285 

1890,      .... 

3,157,990 

2,360,718 

797,272 

1891,      .... 

3,232,995 

2,402,666 

830,329 

1892  
1893,      .... 
1894,      .... 

3,439,399 
3,726,740 
3,422,137 

2,575,839 
2,835,011 
2,515,558 

863,560 
891,729 
906,579 

1895,      .... 

3,642,087 

2,642,631 

999,456 

1896  
1897,      .... 

3,829,528 
3,787,621 

2,729,665 
2,695,274 

1,099,862 
1,092,347 

1898,      .... 

4,184,240 

3,132,511 

1,051,729 

1899,      .... 

5,186,981 

3,861,716 

1,325,265 

1900,      .... 

5,108,053 

3,761,822 

1,346,231 

1901,      .... 

5,259,371 

3,980,934 

1,278,437 

on  Corporation  Laws. 


67 


Distribution  of  Tax  on  Public  Service  Corporations. 


Total  Tax. 

Cities  and  Towns. 

Commonwealth. 

Commonwealth 
per  Cent. 

1897, 

$2,474,953  81 

$1,656,907  34 

$818,046  47 

33.05 

1898, 

2,826,610  56 

2,014,132  57 

812,477  99 

28.39 

1899, 

3,647,912  98 

2,599,983  88 

1,047,929  10 

28.72 

1900, 

3,336,965  00 

2,324,842  00 

1,012,123  00 

30.30 

1901, 

3,563,662  46 

2,622,829  83 

940,832  63 

26.37 

Other  than  Public  Service  Corporations. 


*1897,      . 

$1,312,667  66 

$1,038,366  94 

$274,300  72 

20.89 

*1898,      . 

1,357,630  16 

1,118,378  73 

239,251  43 

17.62 

•1899,      . 

1,539,068  34 

1,261,733  52 

277,334  82 

18.01 

*1900,      . 

1,771,088  84 

1,436,980  74 

334,108  10 

18.86 

1901,      . 

1,686,577  55 

1,355,143  17 

331,434  38 

19.53 

Approximate. 


PART  III. 


€0mm0ra»eaitl)  of 


In  the  Year  One  Thousand  Nine  Hundred  and  Three. 


AN  ACT 

Relative  to  Business  Corporations. 

Section  GENERAL   PROVISIONS. 

1.  Application  of  act. 

2.  Rights  and  liabilities  of  existing  corporations. 

3.  Commissioner  of  corporations. 

4.  Corporate  powers. 

5.  Corporate  name. 

ORGANIZATION  OF  CORPORATIONS. 

6.  Organization  under  special  charter. 

7.  Organization  under  general  laws. 

8.  Agreement  of  association. 

9.  First  meeting  of  incorporators,  — notice. 

10.  Organization,  —  election  of  officers. 

11.  Completion  of  organization,  —  articles  of  organization. 

12.  Certificate  of  incorporation. 

13.  By-laws. 

14.  Issue  and  payment  of  stock. 

15.  Payment  of  stock  by  instalments.    Notice  of  sale.    Forfeiture  of  stock  to 

corporation . 

OFFICERS. 

16.  Officers. 

17.  Election  of  officers. 

18.  Powers  of  board  of  directors,  —executive  committee. 

MEETINGS. 

19.  Meetings  of  stockholders. 

20.  Stockholders'  meeting  called  by  justice. 

21.  Special  meetings. 

22.  Voting  rights  of  corporations. 

23.  Voting  powers  of  stockholders,  —  proxies. 

24.  Directors'  meeting. 


70  Report  of  Committee 


Section  STOCK. 

25.  Stock  certificates. 

26.  Classes  of  stock. 

27.  Transfer  of  stock. 

28.  Voting  rights  of  fiduciary  holders  of  stock. 

29.  Stock  books ;  corporate  records. 

30.  Lost  certificates. 

31.  Unclaimed  dividends. 

STOCKHOLDERS'  AND  DIRECTORS'  LIABILITY. 

32.  Liability  of  stockholders. 

33.  —  of  president,  treasurer  and  directors. 

34.  —  of  directors. 

35.  Enforcement  of  liability. 

36.  Procedure. 

37.  Apportionment  of  assessment. 

38.  Defence  of  actions  by  stockholders. 

AMENDMENTS  AFTER  ORGANIZATION. 

39.  Changes  in  agreement  of  association  and  articles  of  organization  ;  sale  of 


40.  Articles  of  amendment. 

41.  Increase  of  capital  stock. 

42.  Reduction  of  capital  stock. 

43.  Remedy  of  minority  stockholder. 

ANNUAL  REPORTS. 

44.  Form  of  annual  report  of  condition. 

45.  Filing  of  annual  report. 
40.  Verification  by  auditor. 

47.  Annual  tax  return. 

48.  Penalty  for  failure  to  file  report  of  condition  or  tax  return. 

49.  Enforcement  of  penalty. 

DISSOLUTION  OF  CORPORATIONS. 

50.  Dissolution  of  corporations. 

51.  Continuation  for  three  years  to  close  affairs. 

52.  Receivers. 

53.  Payment  of  debts  and  distribution  of  surplus. 

54.  Returns  to  secretary  of  dissolution. 

FOREIGN  CORPORATIONS. 

55.  Foreign  corporations  defined. 

56.  Limitation  of  business. 

57.  Appointment  of  attorney. 

58.  Notice  of  process. 

59.  Copy  of  charter,  by-laws  and  certificate  to  be  filed. 

60.  Investigation  as  to  kind  of  business  to  be  done. 

61.  Names  of  foreign  corporations  regulated. 

62.  Foreign  corporations  may  be  sued  and  their  property  attached. 

63.  Foreign  manufacturing  corporations  may  hold  real  estate. 

64.  Issue  of  stock  on  domestic  franchises  regulated. 

65.  Certificate  of  increase  of  capital. 

66.  Annual  certificate  of  condition. 

67.  Approval  of  certificate. 


on  Corporation  Laws.  71 

Section 

68.  Penalty  for  not  filing  certificate. 

69.  Notice  to  delinquent  corporation. 

70.  Liability  of  officers  and  stockholders. 

71.  Enforcement  of  liability. 

TAXATION. 

72.  Local  taxation. 

73.  Valuation  of  corporate  franchise. 

74.  Appeal  from  local  valuation. 

75.  Taxation  of  corporate  franchise. 

76.  Taxation  of  foreign  corporations. 

77.  Remedy  of  corporation  if  assessors'  valuation  exceeds  tax  commis- 

sioner's. 

78.  Notice  of  tax. 

79.  Collection  of  tax. 

80.  Interest  on  unpaid  taxes. 

81.  Liability  of  lessee  for  tax. 

82.  Submission  of  books  to  inspection. 

83.  Appeals  and  reimbursement.  . 

84.  Collection  of  tax  by  warrant. 

85.  Determination  of  validity  of  tax. 

86.  Reimbursement  of  tax  illegally  exacted. 

87.  Distribution  of  tax. 

88.  Determination  and  payment  of  tax. 

ORGANIZATION  AND  FILING  FEES. 

89.  Fee  for  organization  papers. 

90.  — for  increase  of  capital. 

91.  —  for  all  other  certificates,  statements  and  reports. 

92.  —  for  foreign  corporations. 

MISCELLANEOUS  PROVISIONS. 

93.  Fishing  associations. 

94.  Co-operative  associations. 

95.  Free  beds  in  hospitals. 

REPEAL. 

96.  Repeal.     Partial  repeal.  \ 

97.  Construction  of  act. 

98.  Date  of  taking  effect. 

Be  it  enacted  by  the  Senate  and  House  of  Representa- 
tives in  General  Court  assembled,  and  by  the  authority 
of  the  same. 

GENERAL    PROVISIONS. 

1  SECTION  1.     This  act  may  be  cited  as  THE  Application 

J  of  act. 

2  BUSINESS  CORPORATION  LAW.     It  shall,  ex- 

3  cept  as  herein  otherwise  provided,  apply 

4  (a)    To   all   corporations   having    a   capital 

5  stock  and  established  for  the  purpose  of  car- 


72  Report  of  Committee 

6  rying  on  business  for  profit  heretofore  or  here- 

7  after  organized  under  the  general  laws  of  the 

8  commonwealth. 

9  (V)  To  all  such  corporations  heretofore  or- 

10  ganized  under   special   laws   of  the   common- 

11  wealth,   except   so   far    as    its    provisions   are 

12  inconsistent  with  the  provisions   of  any  such 

13  special  laws   enacted  before  the  eleventh  day 

14  of  March  in  the  year  eighteen  hundred  and 

15  thirty-one  as  are   not  subject   to  amendment, 

16  alteration  or  repeal  by  the  general  court. 

17  (c)    To  all  such  corporations  hereafter  or- 

18  ganized   under   special   laws   of  the  common- 

19  wealth  so  far  as  its  provisions  are  consistent 

20  with  the  provisions  of  said  special  laws. 

21  It  shall  not  apply  to  corporations  organized 

22  under  the  general  or  special  laws  of  this  com- 

23  monwealth  for  the  purpose  of  carrying  on  within 

24  the  commonwealth  the  business  of  a  bank,  sav- 

25  ings  bank,  co-operative  bank,  trust  company, 

26  surety  or  indemnity  company,  safe  deposit  com- 

27  pany,  insurance  company,  railroad  or  street  rail- 

28  way  company,  telegraph  or  telephone  company, 

29  gas  or  electric  light,  heat  or  power  company, 

30  canal,   aqueduct  or  water  company,  cemetery 

31  or  crematory  company,  or  to  any  other  corpo- 

32  rations  which  now  have  or  may  hereafter  have 

33  the  right  to  take  or  condemn  land  or  to  exer- 

34  cise  franchises  in  public  ways  granted  by  the 

35  commonwealth  or  by  any  county,  city  or  town. 

36  But  the  provisions  of  this  section  shall  not  be 

37  construed  to  prohibit  the  organization  of  a  cor- 


on  Corporation  Laws.  73 

38  poration  under  the  provisions  of  this  act  for  the 

39  purpose  of  constructing,  maintaining  or  operat- 

40  ing  railroads,  railways,  telegraph  or  telephone 

41  lines,  or  for  the  purpose  of   carrying  on  any 

42  other  lawful  business,  outside  of  this  coraraon- 

43  wealth. 

1  SECTION  2.     Corporations  organized  under  jggjjj,™*, 

2  general  laws  shall  be  subject  to  the  provisions  corpomtions. 

R.  L.  109,  §  3. 

3  of  all  laws  hereafter  enacted  which  may  affect 

4  or   alter   their   corporate    rights   or   duties   or 

5  which  may  dissolve  them;  but  they  shall,  not- 

6  withstanding   their   dissolution,  be   subject   to 

7  the  provisions  of  sections  fifty-one  and  fifty- 

8  two.     Such  amendment,  alteration  or  dissolu- 

9  tion  shall  not  take  away  or  impair  any  remedy 

10  which  may  exist  by  law,  consistently  with  said 

11  sections,  against  such  corporations,  their  stock- 

12  holders  or  officers  for  a  liability  previously  in- 

13  curred.     The  charters  of  all  corporations  which 

14  are  subject  to  the  provisions  of  this  act  and 

15  which  have  been  incorporated  by  special  law 

16  since  the  eleventh  day  of  March  in  the  year 

17  eighteen  hundred  and  thirty-one  and  of  all  such 

18  corporations  as  may  be  hereafter  incorporated 

19  by  special  law  shall  be  subject  to  amendment, 

20  alteration  or  repeal  by  the  general  court.     Cor- 

21  porations  of  the  kind  which  are  subject  to  the 

22  provisions  of  this  act,  and  which  were  incorpo- 

23  rated  by  special  law  before  such  date,  may,  by 

24  amendment  to  their  certificate  of  organization, 

25  adopted  by  a  majority  vote  of  all  their  stock 


74 


Report  of  Committee 


26  as  provided  in  section  thirty-nine,  and  filed  as 

27  provided  in  section  forty,  reorganize  under  this 

28  act,  and  thereupon  and  thereafter,  they  shall  be 

29  governed  in  all  respects  by  the  provisions  of 

30  this  act. 


R.  L.  110,  §  1. 


powpe«ate 


1  SECTION  3.     The  commissioner  of  corpora- 

2  tions  shall  examine  the  certificates  and  reports 

3  submitted  to  him  under  the  provisions  of  this 

4  act,  and  make  suitable  indorsements  upon  such 

5  as  conform  to  the  requirements  of  law.      He 

6  shall  keep  a  record  of  the  names  of  corpora- 

7  tions  which  submit  certificates  to  his  inspection, 

8  of  the  date  of  inspection  and  of  his  certificates 

9  when  given,  and  of  the  result  in  brief  of  his 

10  inspection.     He  shall  report  to  the  attorney- 

11  general  instances  of  neglect  or  of  omission  on 

12  the  part  of  corporations  to  comply  with  the 

13  provisions  of  this  act  for  the  enforcement  of 

14  the  penalties  therefor.     If  a  vacancy  exists  or 

15  if  the  commissioner  is  absent  from  his  office, 

16  the  first  clerk  shall  perform  the  duties  of  the 

17  commissioner,  and   legal  process  served  upon 

18  said  clerk  shall  have  the  same  force  and  effect 

19  as  if  served  upon  the  commissioner. 

1  SECTION  4.    Every  corporation  which  is  sub- 

2  ject  to  the  provisions  of  this  aot  shall  have  the 

3  following  powers  and  privileges  and  be  subject 

4  to  the  following  liabilities:  — 

5  (a)  To  have  perpetual  succession  in  its  cor- 

6  porate  name,  unless  a  period  for  its  duration  is 

7  limited  by  special  law. 


on   Corporation  Laws.  75 

8  (5)   To  sue  or  be  sued  in  its  corporate  name, 

9  and  to  prosecute  or  defend  to  final  judgment 

10  and  execution  or  decree  in  any  court  of  law  or 

11  equity. 

12  (c)  To  have  a  capital  stock  to  such  an  amount 

13  as  may  be  fixed  in  its  agreement  of  association 

14  or  articles  of  organization  or  of  amendment  as 

15  hereinafter  provided. 

16  (d)  To  have  a  corporate  seal,  which  it  may 

17  alter  at  pleasure. 

18  (e)  To  elect  all  necessary  officers,  fix  their 

19  compensation  and  define  their  duties. 

20  (/)  To  hold,   purchase,   convey,   mortgage 

21  or  lease  within  or  without  this  commonwealth 

22  such  real  or  personal  property  as  the  purposes 

23  of  the  corporation  may  require. 

24  (</)  To  make  contracts,  incur  liabilities  and 

25  borrow  money  on  its  credit  and  for  its  use. 

26  (Ji)  To  make  by-laws  not  inconsistent  with 

27  the  laws  of  this  commonwealth,  for  regulating 

28  its  government  and  for  the  administration  of  its 

29  affairs  as  hereinafter  provided. 

30  (f)  To   be  dissolved   or  to   have   its  affairs 

31  wound  up  in  the  manner  hereinafter  provided. 

1       SECTION  5.    A  corporation  which  is  organized  na°mpeorate 

rt  ,  ,  R.  L.'l09,§8. 

z  under  the  general  laws  may  assume  any  name  R- L- 110»  §  16« 

3  which  shall  indicate  that  it  is  a  corporation  as 

4  distinguished  from  a  natural  person  or  a  part- 

5  nership;  but  it  shall  not  assume  the  name  of 

6  another  domestic  corporation  or  of  a  foreign 

7  corporation  or  of  any  partnership  or  association 

8  carrying  on  business  in  this  commonwealth  at 


76  Report  of  Committee 

9  the  time  of  such  organization  or  within  three 

10  years  prior  thereto,  or  a  name  so  similar  thereto 

11  as  to  be  liable  to  be  mistaken  for  it,  except  with 

12  the  consent  in  writing  of  such  existing  corpo- 

13  ration,  association  or  partnership  filed  with  the 

14  articles  of  organization.     The  supreme  judicial 

15  court  or  the  superior  court  shall  have  jurisdic- 

16  tion  in  equity,  upon  the  application  of  any  cor- 

17  poration,    partnership,    association    or    person 

18  interested  or  affected,  to  enjoin  such  corporation 

19  from  doing  business  under  a  name  assumed  in 

20  violation    of   the    provisions    of   this    section 

21  although  its  articles  of  organization  may  have 

22  been  approved  and  a  certificate  of  incorporation 

23  may  have  been  issued  to  it. 

ORGANIZATION    OF    CORPORATIONS. 

i 

?nrSe?Bpae2S       1       SECTION  6.     A  corporation  which  is  created 

charter. 

R.  L.  109,  §§  12,     2  by  special  charter  shall,  if  no  time  is  limited 

3  therein,  be  organized  within  two  years  after  the 

4  passage  of  its  act  of  incorporation.     The  per- 

5  sons  named  in  said  act  and  their  associate  sub- 

6  scribers  to  stock  before  the  date  of  the  act  shall 

7  hold  the  franchise  or  privileges  granted  until 

8  the  corporation  is  organized. 


^       SECTION  7.     Three  or  more  persons  may  as- 
,  §§4-     2  sociate  themselves  by  a  written  agreement  of 

3  association   with    the    intention    of  forming   a 

4  corporation   under   the   general    laws   for  any 

5  lawful  purpose  which  is   not  excluded    by  the 


on  Corporation  Laws.  77 

6  provisions  of  section  one   except   to  buy  and 

7  sell  real  estate  or  to  distil  or  manufacture  in- 

8  toxicating  liquors. 

1  SECTION  8.     The  agreement   of  association  faf3^tof 

r»       i      11  R.  L.  110,  §15. 

2  shall  state :  —  1902, 4«. 

3  (a)  That  the   subscribers  thereto   associate 

4  themselves  with  the  intention  of  forming  a  cor- 

5  poration. 

6  (&)   The  location  of  the  principal  office  of  the 

7  corporation   in    the   commonwealth,   and    else- 

8  where,  in  the  case  of  corporations  organized  to 

9  do  business  outside  the  commonwealth. 

10  (c)  The  purposes  for  which  the  corpoVation 

11  is  formed  and  the  nature  of  the  business  to  be 

12  transacted. 

13  (d)  The  total  amount  of  the  capital   stock 

14  of  the  corporation,  which  shall  not  be  less  than 

15  one  thousand  dollars,  to  be  authorized  and  the 

16  total  amount  to  be  then  issued  ;  the  par  value 

17  of  the  shares,  which  shall  not  be  less  than  ten 

18  dollars  ;  the  number  of  shares  into  which  the 

19  capital  stock  is  to  be  divided,  and  the  restric- 

20  tions,  if  any,  imposed  upon  their  transfer  ;  and, 

21  if  there  are  to  be  two  or  more  classes  of  stock, 

22  a   description    of  the   different   classes   and   a 

23  statement  of  the  terms  on  which  they  are  to  be 

24  created  and  of  the  method  of  voting  thereon. 

25  (e)  The  names  and  residences  of  the  incor- 

26  porators  and  the  amount  of  the  stock  subscribed 

27  for  by  each. 


78  Report  of  Committee 

1       SECTION  9.     The  first  meeting  of  the  incor- 


R.  L.  109,  §§  is,    2  porators  of  a  corporation  organized  under  gen- 

3  eral  or  special  laws  shall  be  called  by  a  notice 

4  which  shall  be  signed  by  one  of  them  and  shall 

5  state  the  time,  place  and  purposes  of  the  meet- 

6  ing.     A  copy  of  such  notice  shall,  seven  days 

7  at  least  before  the  day  appointed  for  the  meet- 

8  ing,  be  given  to  each  incorporator  or  left  at 

9  his   residence   or  usual  place    of  business,   or 

10  deposited   in   the  post-office,  postage  prepaid,. 

11  and  addressed  to  him  at  his  residence  or  usual 

12  place  of  business,  and  another  copy  thereof,  and 

13  an  affidavit  of  the  signer  that  the  notice  has 

14  been  duly  served,  shall  be  recorded  with   the 

15  records  of  the  corporation.     If  all  of  the  incor- 

16  porators   shall   in   writing,  indorsed   upon  the 

17  agreement  of  association,  or,  in  the  case  of  a 

18  corporation  organized  under  a  special  law,  upon 

19  the  charter  or  a  certified  copy  thereof,  waive 

20  such  notice  and  fix  the  time  and  place  of  the 

21  meeting,  no  notice  shall  be  required. 

SlStonof011'"    1       SECTION   10.     At   such  first  meeting,  or  at 
R.  if/iio,  §  19.     2  any    adjournment    thereof,    the    incorporators 

3  shall  organize   by   the  choice,  by  ballot,  of  a 

4  temporary  clerk,  who  shall  be    sworn,  by  the 

5  adoption    of  by-laws  and   by   the   election    of 

6  directors,  of  a  clerk  and  of  such  other  officers 

7  as  the  by-laws  may  prescribe.      The  temporary 

8  clerk  shall   make  and  attest  a    record    of  the 

9  proceedings  until   the   clerk   has  been  chosen 


on  Corporation  Laws.  79 

V 

10  and  sworn,  including  a  record  of  such  choice 

11  and  qualification. 

1  SECTION   11.     A  majority  of  the   directors  °?™^™0ot_ 

2  who   are   elected  at   such   first    meeting   shall  organisation. 

R.  L.  110,  §§  20, 

3  forthwith  make,  sign  and  make  oath  to  articles  44- 

4  setting  forth: — 

5  (a)  A  true  copy   of   the  agreement  of  as- 

6  sociation    and    the   names   of  the   subscribers 

7  thereto,  or  of  the  act  of  incorporation,  as  the 

8  case  may  be. 

9  (6)   The   date   of  the   first   meeting  and  of 

10  the  successive  adjournments  thereof,  if  any. 

11  (c)   The  amount  of  capital  stock  then  to  be 

12  issued  and  the  amount  thereof  to  be  paid  for 

13  in  cash;    whether  such  capital  stock  is  to  be 

14  paid  for  in  whole  or  in   part  before  the   cor- 

15  poration  commences  business,  and  if   in  part, 

16  the  amount  of  the  instalment ;   and  the  amount 

17  of  capital  stock  to  be  paid  for  in  other  prop- 

18  erty.     If  such  other  property  consists  of  real 

19  estate,   its   location,  area   and   the  amount   of 

20  stock  to  be  issued  therefor  shall  be  stated.     If 

21  such  property  is  personal,  it  shall  be  described 

22  in  such  detail  as  the  commissioner  of  corpora- 

23  tions  may  require,  and   the   amount   of  stock 

24  to  be  issued  therefor  stated.    If  any   part   of 

25  the  capital  stock  is  issued  for  services  or  ex- 

26  penses,  the  nature  of  such  services  or  expenses 

27  and  the  amount  of  stock  which  is  issued  there- 

28  for  shall  be  clearly  stated. 


80  Report  of  Committee 

29  (d)  The  name,  residence  and  post-office  ad- 

30  dress  of  each  of  the  officers  of  the  corporation. 

31  The  directors  who  sign   such  articles   shall 

32  be  jointly  and  severally   liable   to   any  stock- 

33  holder  of  the  corporation   for  actual  damages 

34  caused  by  any  statement  therein  which  is  false 

35  and  which  they  have  reasonable  cause  to  be- 

36  lieve  is  false. 


1  SECTION  12.      The    articles    of   organization 

2  and  the  record  of  the  first  meeting  of  the  in- 

3  corporators  shall  be  submitted  to  the  cominis- 

4  sioner  of  corporations,  who  shall  examine  them 

5  and  who  may  require  such  amendment  thereof 

6  or  such  additional  information  as  he  may  con- 

7  sider  necessary.     If  he  finds  that  the  articles 

8  conform    to    the    provisions   of  the  preceding 

9  sections  relative   to    the    organization    of   the 

10  corporation,   he  shall    so   certify    and   indorse 

11  his  approval  thereon.     Thereupon  the  articles 

12  shall,  upon    payment    of  the    fee    hereinafter 

13  provided,  be  filed  in  the  office  of  the  secretary 

14  of  the  commonwealth,  who   shall  cause  them 

15  and  the  indorsement   thereon  to   be   recorded, 

16  and,  except   in   the   case    of  corporations   or- 

17  ganized   under   special    laws,   shall   thereupon 

18  issue  a  certificate  of  incorporation  in  the  fol- 

19  lowing  form  :  — 


COMMONWEALTH    OF    MASSACHUSETTS. 

Be  it  known  that  whereas  (the  names  of  the  subscribers 
to  the  agreement  of  association)  have  associated  them- 
selves with  the  intention  of  forming  a  corporation  under 


on  Corporation  Laws.  81 

the  name  of  (the  name  of  the  corporation),  for  the  pur- 
pose (the  purpose  declared  in  the  agreement  of •  associa- 
tion), with  a  capital  stock  of  (the  amount  fixed  in  the 
agreement  of  association,  with  a  statement  of  the  several 
classes  into  which  the  stock  is  divided  and  their  respec- 
tive amounts,  and  of  the  method  of  paying  for  such  stock, 
whether  by  cash  in  full,  cash  on  instalments,  property, 
or  partly  cash  and  partly  property) ,  and  have  complied 
with  the  provisions  of  the  statutes  of  this  commonwealth 
in  such  case  made  and  provided,  as  appears  from  the 
articles  of  organization  of  said  corporation,  duly  ap- 
proved by  the  commissioner  of  corporations  and  recorded 
in  this  office :  now,  therefore,  I  (the  name  of  the  secre- 
tary), secretary  of  the  commonwealth  of  Massachusetts, 
do  hereby  certify  that  said  (the  names  of  the  subscribers 
to  the  agreement  of  association),  their  associates  and 
successors,  are  legally  organized  and  established  as,  and 
are  hereby  made,  an  existing  corporation  under  the  name 
of  (name  of  the  corporation),  with  the  powers,  rights 
and  privileges,  and  subject  to  the  limitations,  duties  and 
restrictions,  which  by  law  appertain  thereto. 

Witness  my  official  signature  hereunto  subscribed,  and 
the  seal  of  the  commonwealth  of  Massachusetts  hereunto 
affixed,  this  day  of  in  the  year 

(the  date  of  filing  of  the  articles  of  organization). 

20  The  secretary  shall  sign   the    certificate   of 

21  incorporation  and  cause   the  seal  of  the  com- 

22  monwealth  to  be  thereto  affixed,  and  such  cer- 

23  tificate   shall  have  the   force   and  effect   of  a 

24  special  charter.     The  existence    of   every  cor- 

25  poration   shall    begin    upon  the   filing    of  the 

26  articles   of  organization   in   the   office    of  the 

27  secretary  of  the  commonwealth.    The  secretary 

28  of  the  commonwealth  shall  also  cause  a  record 

29  of  the  certificate  of  incorporation  to  be  made, 

30  which    shall    be    conclusive    evidence   of   the 

31  existence  of  such  corporation. 


82  Report  of  Committee 

BfLan86,§26.      1       SECTION   13.      Every   corporation   may   de- 

2  termine  by  its  by-laws   the  time  and  place  of 

3  holding    and    the    manner    of    conducting  its 

4  meetings,  and,  in  accordance  with  the  provi- 

5  sions  of  section  seventeen,  of  electing  its  offi- 

6  cers,   the    powers,    duties    and  tenure    of  its 

7  officers,  the  number  of  its  directors,  the  num- 

8  ber  of  stockholders  and  of  directors  necessary 

9  to  constitute  a  quorum,  the  manner  of  calling 

10  regular  and  special  meetings  of  the  directors, 

11  the  expediency  of  providing  for  an  executive 

12  committee   and  the  duties  which  may  be  dele- 

13  gated  to  it,  the  manner  and  time  of  the  pay- 

14  ment  of  subscriptions  to  its  capital  stock,  the 

15  conditions    under  which   a  new  certificate   of 

16  stock  may  be  issued  in  place  of  a  certificate 

17  which  is  alleged  to  have  been  lost  or  destroyed, 

18  the  method  in  general  of  transacting  its  busi- 

19  ness  and  the  manner  by  which  the  by-laws  may 

20  be  altered,  amended  or  repealed. 

SentoafnBt?cak.~      1       SECTION  14.     Capital  stock  which  is  issued 

2  for   cash   may   be   paid   for   in   full  before    it 

3  is  issued  or  by  instalments.     If  it  is  paid  for  by 

4  instalments,  the  stock  certificate  shall  be  legi- 

5  bly  stamped  with  the  words  " per  cent 

6  paid  up,  balance  payable  as  demanded  by  the 

7  directors  ",  the  proportion  being  stated  to  agree 

8  with  the  facts,  and,  as  each  instalment  is  de- 

9  manded    and    paid,    the    certificate    shall    be 

10  stamped   accordingly.      Stock  may    be   issued 

11  for  property,  services  or  expenses  in  accordance 


on  Corporation  Laws.  83 

12  with  the  provisions   of  section  eleven.     Stock 

13  may   be   issued   for   property,  services  or  ex- 

14  penses  subsequent  to  the  issue   of  stock   cer- 

15  tified  by  the  articles  of  organization  if  a  cer- 

16  tificate  setting  forth  (a)  the  total  amount   of 

17  capital  stock  already  issued  and  outstanding, 

18  (&)    the     amount    of    cash   paid    in  for  stock 

19  already  issued  and  the  amount  of  stock  already 

20  issued  for  property,  services  or  expenses,  (c) 

21  the  amount  of  additional  stock  to  be  issued  for 

22  property,  services  or  expenses  respectively,  (d) 

23  a  description  of  said  property,  or  a  statement 

24  of  the  nature  of  said  services  or  expenses  in 

25  accordance   with    the     provisions    of    section 

26  eleven,  is    prepared   within   thirty  days    after 

27  the   date    when   the   issue   of  such  additional 

28  stock  has  been  authorized,  and  is  signed  and 

29  sworn    to    by  the   president,  treasurer   and  a 

30  majority   of    the    directors.      Such   certificate 

31  shall    be    submitted    to   the   commissioner   of 

32  corporations,  who  shall  examine  it  in  the  same 

33  manner  as  the  original  articles  of  organization. 

34  If  he  finds  that  it  conforms  to    the    require- 

35  ments  of  law,  he   shall  so  certify  and  indorse 

36  his  approval  thereon,  and  it  shall  thereupon  be 

37  filed  in  the  office  of  the  secretary  of  the  com- 

38  monwealth    who,    upon    payment   of  the    fee 

39  hereinafter  provided,  shall  cause  it  and  the  in- 

40  dorsement  thereon  to  be  recorded.     No  issue 

41  of  stock  subsequent  to  the  issue  of  stock  cer~ 

42  tified  by  the  articles  of  organization  shall  be 

43  lawful   until  said   certificate    shall    have   been 


Report  of  Committee 


Payment  of 
stock  by 
instalments. 


Notice  of  sale. 


44  filed  in  the  office  of  the  secretary  of  the  eom- 

45  monwealth  as  aforesaid.     No  stock  shall  be  at 

46  any  time  actually  issued  unless  the  cash,  prop- 

47  erty,    services    or   expenses    for  which  it  was 

48  authorized   to   be   issued  has  been  actually  re- 

49  ceived  or   incurred   by,   or   conveyed   or  ren- 

50  dered  to,  the  corporation;    and  the  president, 

51  treasurer   and   directors  shall    be   jointly  and 

52  severally  liable  to  any  stockholder  of  the  cor- 

53  poration  for  actual  damages  caused  to  him  by 

54  such  issue. 

1  SECTION  15.     If  stock  is  issued  payable  by 

2  instalments,  the  directors  may  require  the  pay- 

3  ment  of  the  unpaid  balance  of  subscriptions  for 

4  stock  in  such  proportions  and  at  such  times  and 

5  places  as  they  deem  proper,  by  making  demand 

6  therefor  according  to  the   by-laws   and    by   a 

7  notice  mailed  to  each  stockholder  at  least  two 

8  weeks  before  any  instalment  is  payable.     If  a 

9  stockholder  neglects  to  pay  an  instalment  for 

10  thirty  days  after  the  time  limited  in  such  notice 

11  for  payment,  the  treasurer  of  the  corporation 

12  may  sell  such  stockholder's  shares   by  public 

13  auction,  and,  out  of  the  proceeds  of  such  sale, 

14  shall  pay  to  the  corporation  all  instalments  then 

15  due  from  such  stockholder  with  interest    and 

16  incidental  charges.     A  notice  stating  the  time 

17  and  place  of  such  sale  and  the  amount  of  the 

18  instalment  due  and  payable  and  also  the  num- 

19  ber  of  the  certificate  and  number  of  shares  of 

20  stock   thus  offered  for    sale  shall   be  sent  by 


on  Corporation  Laws.  85 

21  mail    not   less    than    ten    days    prior  to  such 

22  sale    to    such    stockholder     and    also    to  the    . 

23  person  who  originally   subscribed   to  the  said 

24  delinquent    stock.      Upon    the    sale    of    such 

25  stock   as    aforesaid,  the  directors  shall   trans- 

26  fer  the  shares   so   sold  to  the  purchaser,  who 

27  shall  be  entitled  to  a  certificate  therefor.     The 

28  balance  of  the  proceeds  of  such  sale  shall  be 

29  held  by  the  corporation  for  such  stockholder, 

30  his  representatives  or  assigns,  and  be  paid  to 

31  him  or  them  at  any  time  upon  surrender  and 

32  delivery  to  the  corporation   of  his   certificate. 

33  If  no   person   offers   an    amount    sufficient  to 

34  pay  all  instalments  due  upon  such  stock  with 

35  interest  and  incidental   charges,  the   treasurer 

36  of  the  corporation  may  bid  it  in  for  the  cor- 

37  poration ;  and  thereupon  such  delinquent  stock- 

38  holder  or  such  person  who  originally  subscribed 

39  to  such  stock  shall  be  liable  to  the  corporation 

40  in  an  action  at  law   for  such  deficiency;    and 

41  upon   the   recovery   of  such    deficiency,   such 

42  stockholder  or  such  subscriber  shall  upon  the 

43  surrender  or  delivery  of  the  outstanding  cer- 

44  tificate  be  entitled  to  a  new  certificate  stating 

45  that   such  instalment  has  been  paid.     If  such  Forfeiture  of 

stock  to 

46  delinquent   stock   is   not   sold  or  if  such    de- 

47  ficiency  is  not  recovered  in  an  action  at  law, 

48  said    stock   shall  be   forfeited  to  the  corpora- 

49  tion  and  an  entry    of  transfer  to   it   shall   be 

50  made  within  a  reasonable  time  on  its   books. 

51  While  the  stock  remains  the  property  of  the 

52  corporation,  no  dividends  shall  be  declared  nor 


86  Report  of  Committee 

53  instalments  paid  upon  it,  but   it   shall  remain 

54  subject  to  the  control  of  the  corporation  accord- 

55  ing  to  its  by-laws.     At  the  expiration  of  said 

56  thirty  days'  time  for  declaring  the  said  stock 

57  delinquent,  the  directors  may  waive  their  right 

58  to  offer  the   same   for  sale  by  public   auction 

59  and  may  elect  to  proceed  by  an  action  at  law 

60  against  said  delinquent  stockholder  or  against 

61  such  original  subscriber  to  recover  said  instal- 

62  ment,  interest  and  incidental  charges. 

OFFICERS. 
EmL.Tib,  §22.      1       SECTION  16.     The  business  of  every  corpo- 

2  ration  shall  be  managed  and  conducted  by  a 

3  president,  a  board  of  not  less  than  three  direc- 

4  tors,  a  clerk,  a  treasurer  and  such  other  officers 

5  and  agents  as  the  corporation   by  its  by-laws 

6  shall  authorize. 

officfr°Bnof         1       SECTION  17.     The  directors,  the   treasurer, 

R.  L.  110,  §§22- 

2  the  clerk  and  such  other   officers   as   the   by- 

3  laws  may  prescribe  shall  be  elected  annually 

4  by  the   stockholders  by  ballot,  and  the  presi- 

5  dent   shall   be   elected   annually   by   and  from 

6  the  board  of  directors.     Every  director,  unless 

7  the  by-laws  otherwise  provide,  shall  be  a  stock- 

8  holder.     The  treasurer  may  be  required  to  give 

9  a  bond  for  the  faithful  performance  of  his  duty 

10  in  such   sum   and   with    such   sureties    as   the 

11  by-laws  may  prescribe.     The  clerk,  who  shall 

12  be  a  resident  of  this   commonwealth,  shall  be 

13  sworn  and  shall  record  all  votes  of  the  corpo- 


on  Corporation  Laws.  87 

14  ration  in  a  book  to  be  kept  for  that  purpose. 

15  Every  corporation  may,  by  its  articles  of  or- 

16  ganization  or  by  an  amendment  to  such  articles 

17  adopted  as  hereinafter  provided,  divide  its  di- 

18  rectors  into  classes  and   prescribe   the   tenure 

19  of  office  of  the  several  classes;   but  no  class 

20  shall  be  elected  for  a  shorter  period  than  one 

21  year  or  for  a  longer  period  than  five  years,  and 

22  the  term  of  office  of  at  least  one  class  shall 

23  expire  in  each  year.    Except  as  herein  other- 

24  wise   provided,   the   officers    of   a    corporation 

25  shall  hold  office  for   one  year  and  until  their 

26  successors  are  chosen  and  qualified.     The  man- 

27  ner  of  choosing  or  of  appointing  all  other  agents 

28  and  officers  and  of  filling  all  vacancies  shall  be 

29  prescribed  by  the  by-laws,  and,  in  default  of 

30  such  by-law,  vacancies  may  be   filled   by  the 

31  board  of  directors. 

1  SECTION  18.     The   board  of  directors   may  Powers  of  board 

"    of  directors,— 

2  exercise  all  of  the  powers  of  the  corporation, 

3  except  such  as  are  conferred  by  law,  or  by  the 

4  by-laws   of  the   corporation,   upon   the   stock- 

5  holders.     A  corporation   may,  by  its  by-laws, 

6  provide  for  an  executive  committee  to  be  elected 

7  from  and  by  its  board  of  directors.     To  such 

8  committee  may  be  delegated  the  management 

9  of  the  current  and   ordinary   business   of  the 

10  corporation,  and  such  other  duties  as  the  by- 

11  laws  may  prescribe. 


88  Report  of  Committee 


MEETINGS. 

1  SECTION  19.     There  shall  be  an  annual  meet- 

2  ing  of  the  stockholders  and  the  time  and  place 

3  of  holding  it,  and  the  manner  of  conducting  it, 

4  shall  be  fixed  by  the  by-laws;  but  it  shall  be 

5  held  within  sixty  days   after   the  end  of  the 

6  fiscal  year  of  the  corporation.     All  meetings 

7  of  stockholders  shall  be  held  in  the  common- 

8  wealth.      A  written  or  printed  notice  stating 

9  the  place,  day  and  hour  thereof,  shall  be  given 

10  by  the  clerk  at  least  seven  days  before  such 

11  meeting,  to  each  stockholder  by  leaving  such 

12  notice  with  him  or  at  his  residence  or  usual 

13  place  of  business,  or  by  mailing  it,  postage  pre- 
14  paid,  and  addressed  to  each  stockholder  at  his 

15  address  as  it  appears  upon  the  books  of  the  cor- 

16  poration.      Unless  the  by-laws  otherwise  pro- 

17  vide,  a  majority  in  interest  of  all  stock  issued 

18  and    outstanding    and    entitled    to    vote    shall 

19  constitute  a  quorum.     Notices  of  all  meetings 

20  of   stockholders    shall   state  the   purposes   for 

21  which  the  meetings  are  called.     No  notice  of 

22  the  time,  place  or  purpose  of  any  regular  or 

23  special   meeting    of  the   stockholders  shall  be 

24  required  if  every  stockholder,  or  his  attorney 

25  thereunto   authorized,   by  a  writing  which   is 

26  filed  with  the  records  of  the  meeting,  waives 

27  such  notice. 


1       SECTION  20.     If,  by  reason  of  the  death  or 

by  justice  of 

ReLpe?o9e'§i5       *  absence  of  the  officers  of  a  corporation,  or  other 


on  Corporation  Laws.  89 

3  cause,  there  is  no  person  duly  authorized  to  call 

4  or  preside  at  a  legal  meeting,  or  if  the  clerk 

5  or  other  officer  refuses  or  neglects  to  call  it,  a 

6  justice  of  the  peace  may,  upon  written  applica- 

7  tion  of  three  or  more  of  the  stockholders,  issue 

8  a  warrant  to  any  one  of  them,  directing  him  to 

9  call  a  meeting  by  giving  such  notice  as  is  re- 

10  quired  by  law,  and  may,  by  the  same  warrant, 

11  direct  him  to  preside  at  the  meeting  until   a 

12  clerk  is  duly  chosen  and  qualified,  if  no  officer 

13  of  the  corporation  is   present  who  is   legally 

14  authorized  to  preside. 

1  SECTION  21.     Special  meetings  of  the  stock-  special 

meetings. 

2  holders  may  be  called  by  the  president,  by  a 

3  majority  of  the  directors,  or  by  the  clerk  upon 

4  written  application  of  three  or  more  stockhold- 

5  ers  who  are  entitled  to  vote  and  who  hold  at 

6  least  one-third  part  in  interest  of  the  capital 

7  stock,  stating  the  time,  place  and  purpose  of 

8  the  meeting. 


1  SECTION  22.     No  corporation  shall,  directly  voting  rights 

of  corporations. 

2  or  indirectly,  vote  upon  any  share  of  its  own 

3  stock. 


1  SECTION  23.     Stockholders  who  are  entitled 

c\  in  «-ii»  .  — proxies. 

2  to  vote  shall,  except   as    provided    in   section  R.L.uo,§25. 

3  ninety-four,  have  one  vote  for  each  share  of 

4  stock  owned  by  them.     Capital  stock  shall  not 

5  be  voted  upon  if  any  instalment  of  the  sub- 

6  scription    therefor   which    has    been   duly    de- 


90 


Report  of  Committee 


Directors' 
meetings. 


7  manded  under  the  provisions  of  section  fifteen 

8  is    overdue   and   unpaid,  and   increased  stock 

9  which  has  been  issued  under  the  provisions  of 

10  this  act  shall  not  be  voted  upon  until  it  has  been 

11  paid  in  full.     Stockholders  may  vote  either  in 

12  person  or  by  proxy.     No  written  proxy  which 

13  is  dated  more  than  six  months  before  the  meet- 

14  ing  named  therein  shall  be  accepted,  and  no 

15  such  proxy  shall  be  valid  after  the  final   ad- 

16  journment  of  such  meeting. 

1  SECTION  24.     Meetings  of  the  board  of  di- 

2  rectors    may   be   held    within   or   without   the 

3  commonwealth.     Any  meeting  of  the  board  of 

4  directors  shall  be  a  legal  meeting  without  notice 

5  if  each  director,  by  a  writing  which  is  filed  with 

6  the  records  of  the  meeting,  waives  such  notice. 


Stock 
certificates. 
B.  L.  110,  §27. 


STOCK. 

1  SECTION  25.     Each  stockholder  shall  be  en- 

2  titled  to  a  certificate,  in  form  conformable  to 

3  the  provisions  of  section  fourteen,  which  shall 

4  be  signed  by  the  president  and  by  the  treasurer 

5  of  the  corporation,  shall  be  sealed  with  its  seal 

6  and  shall  certify  the  number  of  shares  owned 

7  by  him  in  such  corporation.     Each  certificate 

8  of  stock  which  by  the  agreement  of  associa- 

9  tion  or  amended  agreement  of  association   or 

10  article  of  organization  is  limited  as  to  its  voting 

11  rights,  or  which  is  preferred  as  to  its  dividend, 

12  or  as  to  its  share  of  the  principal  upon  dis- 

13  solution,  shall  have  a  sufficient  statement  of 


on  Corporation  Laws.  91 

14  such  limitation  or  preference  plainly  written  or 

15  stamped  upon   it,  and  each   certificate  subse- 

16  quently  issued  of  any  class  of  stock  in  the  cor- 

17  poration  shall  have  printed  or  stamped  thereon 

18  the  clause  of  such  agreement  of  association  or 

19  amended   agreement  of  association   or   article 

20  of  organization. 

1  SECTION  26.     Every  corporation  may  create  °91J2flB«51of9tock- 

2  two  or  more  classes  of  stock  with  such  prefer- 

3  ences,  voting  powers,  restrictions  and  qualifica- 

4  tions  thereof  as  shall  be  fixed  in  the  agreement 

5  of  association  or,  in   the  case  of  corporations 

6  incorporated  by  special  law,  in  the  articles  of 

7  organization,  or  in  an  amendment  to  said  agree- 

8  ment  or  articles  which  may  be  adopted  as  here- 

9  inafter  provided. 


1  SECTION  27.     The  delivery  of  a  certificate  of  Btock. 

2  stock   by  the  rightful  owner  or   by  a  person 

3  entrusted  by  him  with  its  possession  for  any 

4  purpose  to  a  bona  fide  purchaser  or  pledgee  for 

5  value,  with  a  written  transfer  thereof,  or  with 

6  a  written  power  of  attorney  to  sell,  assign  or 

7  transfer  the  same,  signed  by  the  person  named 

8  as  the  stockholder  in  such  certificate,  shall  be 

9  a  sufficient  delivery  to  transfer  title  as  against 

10  all  persons;  but   no  such  transfer  shall  affect 

11  the  right  of  the  corporation  to  pay  any  dividend 

12  due  upon  the  stock,  or  to  treat  the  holder  of 

13  record  as  the  holder  in  fact,  until  it  has  been 

14  recorded  upon  the  books   of  the  corporation, 


Transfer  of 

stock. 

R.  L.  109,  §§  3T, 


92  Report  of  Committee 

15  or  until  a  new  certificate  has  been   issued   to 

16  the   person   to    whom    it   has   been    so   trans- 

17  ferred.     Such  purchaser,  upon  production  and 

18  delivery  of  the  former  certificate  to  the  treasurer 

19  of  the  corporation,  shall  be  entitled  to  receive 

20  a  new  certificate.     Stock   shall   not   be  trans- 

21  ferred  upon  the  books  of  the  corporation  if  any 

22  instalments  thereon  remain  overdue  and  unpaid. 

23  A    pledgee  of  stock  transferred   as   collateral 

24  security  shall  be  entitled  to  a  new  certificate  if 

25  the   instrument   of  transfer    substantially    de- 

26  scribes  the  debt  or  duty  which  is  intended  to  be 

27  secured  thereby.     Such  new  certificate  shall  ex- 

28  press  on   its  face  that  it  is  held  as  collateral 

29  security,  and  the  name  of  the  pledgor  shall  be 

30  stated  thereon,  who  alone  shall  be  liable  as  a 

31  stockholder,  and  entitled  to  vote  thereon. 


1  SECTION     28.       Executors,     administrators, 

holders  of  stock.       o  J*  •  ..  i 

2  guardians,   trustees    or    persons  in    any   other 

3  representative  or  fiduciary  capacity  may  vote 

4  as  stockholders  upon  stock  held  in  such  capacity. 


cr 


^       SECTION    29.      The    agreement   of  associa- 
R.cLr.io9,§§  32-    2  tion,  an  attested  copy  of  the  articles  of  organi- 

3  zation    or    of   articles    in  amendment   of  said 

4  agreement  or  of  said  articles  and  of  the    by- 

5  laws,  with   a   reference  on  the  margin  of   the 

6  copy  of  the  by-laws  to  all  amendments  thereof, 

7  and  a  true  record  of  all   meetings   of  stock- 

8  holders  shall  be   kept  by  every  corporation  at 

9  its  principal  office  in    this  commonwealth  for 


on  Corporation  Laws.  93 

10  the  inspection  of  its  stockholders.     The  stock 

11  and  transfer  books  of  every  corporation,  which 

12  shall  contain  a  complete  list  of  all  stockholders, 

13  their  residences  and  the  amount  of  stock  held 

14  by  each,  shall  be  kept  at  an  office  of  the  cor- 

15  poration  in  this  commonwealth  for  the  inspec- 

16  tion    of    its    stockholders.      Said    stock    and 

17  transfer  books    and   said   attested  copies   and 

18  records  shall    be  competent   evidence   in    any 

19  court  of  this  commonwealth.     If  any  officer  or 

20  agent  of  a  corporation  having  charge  of  such 

21  copies,  books  or  records  refuses  or  neglects  to 

22  exhibit  them  or  to  submit  them  to  examination 

23  as  aforesaid,  he  or   the    corporation    shall    be 

24  liable  to  any  stockholder  for  all  actual  damages 

25  sustained  by  reason  of  such  refusal  or  neglect, 

26  and  the  supreme  judicial  court  or  the  superior 

27  court  shall  have  jurisdiction   in   equity,  upon 

28  petition  of  a  stockholder,  to  order  any  or  all  of 

29  said  copies,  books  or  records  to  be  exhibited  to 

30  him  and  to  such  other  stockholders  as  may  be- 

31  come  parties  to  said  petition,  at  such  a  place 

32  and  time  as  may  be  designated  in  the  order. 

SECTION  30.     The  directors  of  a  corporation  Lost  certifi- 
cates. 

2  may,   unless  otherwise    provided   by    the   by-  R- L- 110>  §  28- 

3  laws,   determine  the  conditions  upon  which  a 

4  new  certificate  of  stock  may  be  issued  in  place 

5  of   any   certificate    which   is   alleged   to   have 

6  been  lost   or  destroyed.     They  may,  in   their 

7  discretion,   require   the    owner   of    a    lost    or 

8  destroyed  certificate,  or  his  legal   representa- 


94  Report  of  Committee 

9  tive,  to  give  a  bond  with  sufficient  surety  to  the 

10  corporation  in    a    sum   not  exceeding   double 

11  the  market  value    of    the    stock   to  indemnify 

12  the  corporation  against  any  loss  or  claim  which 

13  may  arise  by  reason  of  the  issue  of  a  certifi- 

14  cate  in  place  of  such  lost   or  destroyed  stock 

15  certificate. 

SSdSSid          1       SECTION  31.     Every  corporation  shall,  once 

R.  L.  109,  §  40. 

2  in  every  five  years,  publish  three  times  success- 

3  ively  in  a  newspaper  in  the  city  of  Boston,  and 

4  also  in  a  newspaper  in  the  county  in  which  the 

5  principal  office  of  the  corporation  is  located,  a 

6  list  of  all  dividends  which  have  remained  un- 

7  claimed  for  two  years  or  more  and  the  names 

8  of  the  persons  to  whose  credit  such  dividends 

9  stand. 

STOCKHOLDERS'  AND  DIRECTORS'  LIABILITY. 
^khSdeis.       1       SECTION  32.     The  stockholders  of  a  corpo- 

R.L.  110,  §59.  .  . 

2  ration  who  vote  to  reduce  its  capital  stock  shall 

3  be  liable  for  the  payment  of  the  debts  and  con- 

4  tracts  of  the  corporation  existing  at  the  time  of 

5  such  reduction  to   the   extent   of  the  amount 

6  withdrawn  and  paid  to  them.     A  stockholder 

7  who  does  not  vote  to  authorize  such  reduction 

8  shall    be   liable    only    to    the    extent    of    the 

9  amount  withdrawn  and  paid  to  him.     The  pro- 

10  visions  of  this   section   shall   not   render   any 

11  stockholder  liable  for  any  amounts  paid  by  the 

12  corporation  to  its  stockholders,  by  reason  of  a 

13  lawful  reduction  of  its  capital  stock  in  accord- 


on  Corporation  Laws.  95 

14  ance   with    the    provisions   of  this   act.      The 

15  stockholders  of  a  corporation  shall  also  be  liable 

16  for   all   money   due  to  operatives  for  services 

17  rendered   within    six   months    before    demand 

18  made  upon  the  corporation  and  its  neglect  or 

19  refusal  to  make  such  payment.     A  stockholder 

20  who  pays  on  a  judgment  or   otherwise   more 

21  than  his  proportion  of  any  such  debt  shall  have 

22  a  claim    for    contribution    against    the    other 

23  stockholders. 


1  SECTION  33.     The   president,  treasurer  and 

__.  11-11  i       treasurer  and 

2  directors  of  every  corporation  shall  be  jointly  J'JJ 

3  and  severally  liable  for  all  the  debts  and  con- 

4  tracts  of  the  corporation  contracted  or  entered 

5  into  while  they  are  officers  thereof  if  any  stock 

6  is  issued  in  violation  of  the  provisions  of  section 

7  fourteen,  or  if  any  statement  or  report  which 

8  is  required   by    the   provisions   of  this   act   is 

9  made  by  them  which  is  false  in  any  material 

10  representation  and  which  they  have  reasonable 

11  cause  to  believe  is  false;  but  only  the  officers 

12  who  sign  such  statement  or  report  shall  be  so 

13  liable. 


1  SECTION  34.     The  directors  of  every  corpo-  -of  directors. 

*  A  K.  Li.  110,  §  58. 

2  ration  shall  be  jointly  and  severally  liable  for 

3  the  debts  and  contracts  of  the  corporation  in 

4  the  following  cases :  — 

5  First.     For  making  or  consenting  to  a  divi- 

6  dend    if   the    corporation    is,    or    thereby    is 


96  Report  of  Committee 

1  rendered,  insolvent,  to  the  extent  of  such  divi- 

8  dend. 

9  Second.     For  debts  contracted  between  the 

10  time    of  making   or   assenting   to  a  loan  to  a 

11  stockholder  or  director  and  the  time  of  its  re- 

12  payment,  to  the  extent  of  such  loan. 

13  Directors  who  dissent  from  their  associates 

14  in  declaring  said  dividend  or  in  making  said 

15  loan  shall  not   be   liable    as   aforesaid  if  they 

16  cause  a  record  of  their   dissent  to  be  entered 

17  upon  the  records  of  the  meeting  at  which  said 

18  action  was  taken. 

HaDbfi°iitcyemeDtof    1       SECTION  35.     A  stockholder  or  officer  in  a 
62.  '  2  corporation  shall  not  be  held  liable  for  its  debts 

3  or  contracts  unless  it  has  been  duly  adjudicated 

4  bankrupt   or  unless  a  judgment  has  been   re- 

5  covered  against  it   and   it   has   neglected,  for 

6  thirty  days  after  demand  made  on  execution,  to 

7  pay  the  amount  due,  with  the  officer's  fees,  or 

8  to  exhibit  to  the  officer  real  or  personal  property 

9  belonging   to  it  and   subject   to  be   taken   on 

10  execution,    sufficient  to  satisfy  the   same,  arid 

11  the  execution  has  been  returned  unsatisfied. 

12  After   such  adjudication   of   bankruptcy   or 

13  after  the  execution  has  been  so  returned,  the 

14  clerk,  or  other  officer  who  has  charge  of  the 

15  records  of  such  corporation,  upon   reasonable 

16  request  of  a  creditor  of  the  corporation  or  of 

17  his  attorney,  shall  furnish  to  him  a  certified  list 

18  of  the  names  of  all  persons  who  were  officers 

19  and    stockholders   in  such   corporation  at   the 


on  Corporation  Laws-  97 

20  time  when  the  petition  in  bankruptcy  was  filed 

21  or  when  the  action  in  which  judgment  was  re- 

22  covered  was  commenced.    The  supreme  judicial 

23  court  or  the  superior  court  shall  have  jurisdic- 

24  tion  in  equity  to  compel  such  list  to  be  furnished. 

25  After  an  adjudication  of  bankruptcy  or  after 

26  the  execution  has  been  so  returned,  any  creditor 

27  may  file  a  bill  in  equity,  in  the  supreme  judicial 

28  court  or  the  superior  court  in  behalf  of  himself 

29  and  of  all  other  creditors   of  the  corporation, 

30  against  it  and   all   persons   who  were  stock- 

31  holders  therein  at  the  date  when  the  petition  in 

32  bankruptcy   was  filed,  or  at  the   time  of  the 

33  commencement  of  the  suit  in  which  such  judg- 

34  ment  was  recovered,  or  against  all  the  officers 

35  who  are  liable  for  its  debts  and  contracts,  for 

36  the  recovery  of  the  money  due  from  the  cor- 

37  poration  to  himself  and  to  the  other  creditors 

38  for  which  the  stockholders  or  officers  may  be 

39  personally  liable  by  reason  of  any  act  or  omis- 

40  sion  on  the  part  of  any  of  them,  setting  forth 

41  the    bankruptcy    of  the    corporation,   or    the 

42  judgment   and   proceedings  thereon,   and  the 

43  grounds  upon  which  it  is  expected  to  charge 

44  the  stockholders  or  officers  personally. 

1  SECTION  36.     Such  suit  shall  not  be  discon-  ?roTce^re;c , 

It.  Li.  110,  §9  65- 

2  tinued  by  the  plaintiff  except  by  order  of  the  61 

3  court  after  notice  to  other  creditors.     It  shall 

4  not   abate    by   reason    of   the    non-joinder    of 

5  persons  liable  as  defendants,  unless  the  plain- 

6  tiff,  after  notice  by  plea  or  answer  of  their 


98  Report  of  Committee 

7  existence,  unreasonably  neglects  to  make  them 

8  parties;    nor  shall  it   abate   by   reason  of  the 

9  death  of  a   defendant,  but  his  estate  shall  be 

10  liable  in  the  hands  of  his  executor  or  admin- 

11  istrator,  who  may  voluntarily  appear,  or  who 

12  may  be  summoned  by  the  plaintiff,  to  defend 

13  the  suit. 

^fSSSSS^     1       SECTION  37.     Such  sums  as  may  be  decreed 

2  to  be   paid  by  the   stockholders  in  such  suit 

3  shall  be  assessed  upon  them  in  proportion  to 

4  the  amounts  of  stock  held  by  them  respectively 

5  at  the  time  when  the  corporation  was  adjudi- 

6  cated  a  bankrupt  or  when  the  action  in  which 

7  the  judgment  was  recovered  was  commenced; 

8  but  a  stockholder  shall  not  be  liable  to  pay  a 

9  larger  amount  than  the  amount  of  stock  held 
10  by  him  at  that  time  at  its  par  value. 

?ctioSsebyf         1       SECTION  38.    If,  in  an  action  against  a  cor- 

Btockholdere. 

R.L.iio.568.     2  poration,  it   appears  to  the  court  that  one  of 

3  the  purposes  of  the  action  is  to  obtain  a  judg- 

4  ment  against  the  corporation  in  order  to  en- 

5  force  an  alleged  liability  of  a  person  who  has 

6  been  or  is    a   stockholder   or    officer    thereof, 

7  such  stockholder  or  officer  may  be  permitted, 

8  on   petition,  to   defend   such   action,   and  the 

9  court  may   require  of  him,  or  of  a  person  in 

10  his   behalf,   a  bond  with  sufficient    surety  or 

11  sureties  conditioned  to  pay  to  the  plaintiff  all 

12  costs  which  may  accrue  and  be  taxed  to  him 

13  after  the  filing  of  said  petition. 


on  Corporation  Laws.  99 


AMENDMENTS    AFTER    ORGANIZATION. 

1  SECTION  39.     Every   corporation  may,  at  a 

2  meeting   duly  called  for  the   purpose,  by  the 

3  affirmative  vote  of  a  majority  of  all  its  stock,  R*L0firo,8?j7, 

29,52. 

4  or  if  two  or  more  classes  of  stock  have  been  R.  L.  no,  §§  31, 

5  issued,  of  a  majority  of  each  class  outstanding  1£ 

6  and  entitled  to  vote,  authorize  an  increase  or 

7  a  reduction  of  its  capital  stock  and  determine 

8  the  terms  and   manner   of  the,  disposition   of 

9  such  increased  stock,  may  authorize  a  change 

10  of  the  location  of  its  principal  office  or  place 

11  of  business  in  this  commonwealth  or  a  change 

12  of  the  par  value  of  the   shares   of  its   capital 

13  stock,   or  may   authorize   proceedings   for  its 

14  dissolution    under    the    provisions   of   section 

15  fifty. 

16  It   may,   at  a  meeting   duly   called   for  the 

17  purpose,  by  the  affirmative  vote  of  two-thirds 

18  of  all  its  stock,  or  if  two  or  more  classes  of 

19  stock  have  been  issued,  of  two-thirds  of  each 

20  class   of    stock    outstanding    and   entitled   to 

21  vote,   change  its   corporate   name,  the  nature 

22  of  its  business,  the  classes  of  its  capital  stock 

23  and   their  voting  power,   or  make   any   other 

24  lawful   amendment  or  alteration  in  its  agree- 

25  ment  of  association  or  articles  of  organization, 

26  or  sell,  lease  or  exchange  all  its  property  and 

27  assets,  including  its   good  will    and    its    cor- 

28  porate   franchise,  upon   such   terms   and   con- 

29  ditions  as  it  deems  expedient. 


100 


Report  of  Committee 


Articles  of 
amendment. 


Increase  of 
capital  stock. 


1  SECTION  40.     Articles  of  amendment  signed 

2  and   sworn  to  by  the  president,   treasurer  and 

3  a  majority  of  the  directors  shall,  within  thirty 

4  days  after  said   meeting,  be  prepared   setting 

5  forth  such  amendment  or  alteration,  and  stat- 

6  ing    that    it    has    been    duly   adopted   by  the 

7  stockholders.     Such  articles  shall  be  submitted 

8  to  the  commissioner  of  corporations,  who  shall 

9  examine    them    in    the    same    manner    as    the 

10  original  articles  of  organization.     If  he  finds 

11  that  they  conform  to  the  requirements  of  law, 

12  he   shall  so   certify  and   indorse  his   approval 

13  thereon,  and  they   shall  thereupon  be  filed  in 

14  the  office   of  the    secretary  of  the   common- 

15  wealth,  who,  upon  payment  of  the  fee  herein- 

16  after    provided,    shall    cause    them,    and    the 

17  indorsement    thereon,    to    be    recorded.      No 

18  amendment  or  alteration  of  the  agreement  of 

19  association    or    articles    of   organization   shall 

20  be   lawful  until   said   articles    of   amendment 

21  shall  have  been  filed  in  the  office  of  the  sec- 

22  retary  of  the  commonwealth  as  aforesaid. 

1  SECTION  41.     If  an    increase   in   the    total 

2  amount  of  the  capital  stock  of  any  corporation, 
8  shall   have    been    authorized    by    vote    of   its 

4  stockholders  in  accordance  with  the  provisions 

5  of  section  thirty-nine,  the  articles   of  amend- 

6  ment  shall  also  set  forth  (a)  the  total  amount 

7  of  capital  stock  already  authorized  and  issued; 

8  (&)   the  amount   of    cash    paid    in    for    stock 

9  already  issued  and  the  amount  of  stock  already 


on  Corporation  Laws.  101 

10  issued  for  property,  service  or  expenses;    (c) 

11  the  amount  of  additional  stock  authorized;   (d) 

12  the  amount  thereof  to  be  paid  for  in  cash  and 

13  the   amount  to   be   paid  for   in   property,   to- 

14  gether  with  a  description  of  such  property  to 

15  be    made   in    accordance   with    the    provisions 

16  of  section  eleven. 


1  SECTION  42.     If  a  reduction  of  the  capital 

2  stock  of  any  corporation  shall  have  been  author- 

3  ized  by  its  stockholders  in  accordance  with  the 

4  provisions  of  section   thirty-nine,   the   articles 

5  of  amendment  shall  also  set  forth  (a)  the  total 

6  amount  of  capital  stock  already  authorized  and 

7  issued;    (6)  the  amount  of  the  reduction  and 

8  the  manner  in  which  it  shall  be  effected;   (c) 

9  a  copy  of  the  vote  authorizing  the  reduction. 

10  'No  reduction  of  capital  stock  shall  be  lawful 

11  which  renders   the  corporation  bankrupt,  but 

12  the  capital  stock  may  be  reduced  by  the  sur- 

13  render  by  every  stockholder  of  his  shares  and 

14  the  issue  to  him  in  lieu  thereof  of  a  proportional 

15  decreased  number  of  shares,  if  the  assets  of 

16  such    corporation    are    not    reduced    thereby, 

17  without   creating    any   liability   of    the   stock- 

18  holders  of  such  corporation  in  case  of  the  sub- 

19  sequent  bankruptcy  of  such  corporation.     No 

20  vote  authorizing  the  reduction  of  capital  stock 

21  shall  be  valid  unless  the  record  of  the  meeting 

22  at  which  said  reduction  was  authorized  includes 

23  a  list  of  all  stockholders  who  voted  in  favor 

24  thereof. 


102 


Report  of  Committee 


Remedy  of 
minority  stock- 
holder. 


1  SECTION  43.      A   stockholder    in   any   cor- 

2  poration  which  shall  have  duly  voted  to  sell, 

3  lease  or  exchange  all  its  property  and  assets 

4  in   accordance  with   the  provisions  of  section 

5  thirty-nine,  who,  at  the  meeting  of  stockhold- 

6  ers,  has  voted  against  such  action  may,  within 

7  thirty  days  after  the  date  of  said  meeting,  make 

8  a  demand  in  writing  upon  the  corporation  for 

9  payment  for  his  stock.     If  the  corporation  and 

10  the  stockholder  cannot   agree  upon  the  value 

11  of  the  stock  at  the  date  of  such  sale,  lease  or 

12  exchange,  such  value  shall  be  ascertained  by 

13  three  disinterested  persons,  one  of  whom  shall 

14  be  named  by  the  stockholder,  another  by  the 

15  corporation   and   the    third    by  the  two   thus 

16  chosen.     The  finding  of  the  appraisers  shall 

17  be  final,  and  if  their  award  is  not  paid  by  the 

18  corporation  within  thirty  days  after  it  is  made, 

19  it  may  be  recovered  by  the   stockholder  from 

20  the  corporation  in  an  action  of  contract.     Upon 

21  payment  by  the  corporation  to  the  stockholder 

22  of  the  agreed  or  awarded  price  of  his  stock, 

23  the   stockholder   shall   forthwith   transfer   and 

24  assign   the  stock  certificates  held  by  him  at, 

25  and   in   accordance   with,   the   request  of  the 

26  corporation. 


Form  of  annual 
report  of  condi- 
tion. 
R.  L.  110,  §  51. 


ANNUAL    REPORTS. 

1  SECTION  44.     Every  corporation  shall  annu- 

2  ally,  within  thirty  days  after  the  date  fixed  in 

3  its   by-laws   for  its   annual   meeting  last  pre- 

4  ceding    the    date    of   such    report,  or    within 


on  Corporation  Laws.  103 

5  thirty  days  after  the  final  adjournment  of  said 

6  meeting,  but  not  more  than  three  months  after 

7  the  date  so  fixed  for  said  meeting,  prepare  a 

8  report  of  condition  to  be  signed  and  sworn  to 

9  by  its  president,  treasurer  and  at  least  a  major- 

10  ity  of  its  directors  stating :  — 

11  1.     The  name  of  the  corporation. 

12  2.     The  location  (with  street  address)  of  its 

13  principal  office  in  this  commonwealth  and  else- 

14  where,  in  the  case  of  a  corporation  organized 

15  to  do  business  outside  the  commonwealth. 

16  3.     The  date  of  its  last  annual  meeting. 

17  4.     The  total  amount  of  its  authorized  capital 

18  stock;  the  amount  issued  and  outstanding;  the 

19  class  or  classes,  if  any,  into  which  it  is  divided; 

20  the  par  value  and  number  of  its  shares. 

21  5.     The    names    and   addresses   of  all  the 

22  directors  and  officers  of  the   corporation,  and 

23  the  date  at  which  the  term  of  office  of  each 

24  expires. 

25  6.     A  statement  of  the  assets  and  liabilities 

26  of  the  corporation  as  of  the  date  of  the  end  of 

27  its  last  fiscal  year,  to  be  made  substantially  in 

28  the  following  form :  — 


ASSETS. 

Real  Estate : 

Machinery:      ......... 

Merchandise : 

Manufactures,  merchandise,  material  and  stock  in  process. 

Cash  and  debts  receivable, 

Patent  rights,  trade  marks,  good  will,   .... 
Other  assets, 

Total, 


104:  Report  of  Committee 


LIABILITIES. 

Capital  stock, 

Bills  and  accounts  payable,    . 
Funded  indebtedness,      .... 
Floating  indebtedness,    .... 
Balance, .  ...... 


Total, 


Faing  of  annual    j       SECTION  45.     Such  report  shall  be  submitted 

2  to  the  commissioner  of  corporations,  who  shall 

3  examine  it  and  if  he  finds  that  it  conforms  to 

4  the  requirements  of  this  act,  he  shall  indorse 

5  his  approval   thereon;  and  upon  the  payment 

6  of  the  fee  hereinafter  provided,  it  may  be  filed 

7  in  the  office  of  the  secretary  of  the  common- 

8  wealth,  who  shall  receive  and  record  it  in  books 

9  to  be  kept  for  the  purpose  and  which  shall  be 

10  open  to  public  inspection.     Upon  such  filing, 

11  the  corporation  and   its  officers  shall  be  con- 

12  clusively  held  to   have  complied  with  the  re- 

13  quirements  of  this  act  in  respect  to  the  filing 

14  of   such  report   except  that  it  may  be  shown 

15  in  evidence  that  any  statement  made  in  such 

16  report  was  false,  and  that  the  officer  or  officers 

17  who  signed  or  made  oath  to  it  had  reasonable 

18  cause  to  believe  it  to  be  false. 

verification  by     ^       SECTION  46.     Such  report  of  a  corporation 

E.  L.  110,  §  52. 

2  which  has  a  capital  stock  of  one  hundred  thou- 

3  sand  dollars  or  more  shall  be  accompanied  by 

4  a  written  statement  under  oath  by  an  auditor 

5  to  be   employed  for  each  ensuing  fiscal   year 

6  by  a  committee  of  three  stockholders  who  are 


on  Corporation  Laws.  105 

7  not  directors  which  shall  be  selected   at  each 

8  annual  meeting  of  the  stockholders,  or,  if  there 

9  are  less  than  three  stockholders  other  than  di- 

10  rectors,  to  be  employed  by  the  directors,  stating 

11  that  such  report  represents  the  true  condition 

12  of  the  affairs  of  said  corporation  as  disclosed 

13  by  its  books  at  the  time  of  making  such  audit. 

14  The  statement  of  the  auditor  shall  be  filed  by 

15  him  with  said  report  in  the  office  of  the  sec- 

16  retary   of  the  commonwealth  and  shall  be  at- 

17  tached  to  and  form  part  of  it.     The  auditor 

18  shall  be  sworn  to  the  faithful  performance  of 

19  his  duties  by  a  justice  of  the  peace  or  some 

20  other  magistrate  authorized  to  administer  oaths 

21  or  affirmations;  and  evidence  of  such  appoint- 

22  ment   and   qualification   shall  be   filed  in   the 

23  office  of  the  commissioner  of  corporations. 

1  SECTION  47.    Every  corporation  shall  annu-  Annual  taz 

return. 

2  ally,  between  the  first  and  tenth  days  of  May,  R<  L* 14>  §  3T* 

3  make  a  return  to  the  tax  commissioner,  under 

4  the  oath  of  its  treasurer,  stating  the  name  of 

5  the   corporation   and   setting  forth   as   of  the 

6  first   day   of  May   of  the  year  in   which  the 

7  return  is  made:  — 

8  1.     The  total  authorized  amount  of  the  capi- 

9  tal  stock  of  the  corporation ;  the  amount  issued 

10  and  outstanding;  the  classes,  if  any,  into  which 

11  it  is  divided ;  the  par  value  and  number  of  its 

12  shares;  the  market  value  of  the  shares  of  its 

13  stock,  or  of  each  class   of  its   stock  if  there 

14  are  two  or  more  classes. 


106  Report  of  Committee 

15  2.     A   statement  in  such  detail  as  the  tax 

16  commissioner  may  require  of  the  real  estate, 

17  machinery  and  other  assets  belonging  to   the 

18  corporation  within  and  without  the   common- 

19  wealth. 

20  3.     A  complete  list  of  the  stockholders   of 

21  the  corporation,  their  residences  and  the  amount 

22  of  stock  belonging  to  each.     If  stock  is  held 

23  as  collateral  security,  the   list  shall  state  the 

24  name  and  residence  of  the  pledger  and  of  the 

25  pledgee. 

26  Such  return  shall  be  filed  by  the  tax  com- 

27  missioner,  and  shall  be  open  only  to  the  inspec- 

28  tion  of  the   tax  commissioner,  his   clerks  and 

29  assistants,  and  such  other  officers  of  the  com- 

30  monwealth  as  may  have  occasion  to  inspect  it 

31  for  the  purpose  of  assessing  or  of  collecting 

32  taxes. 


1       SECTION  48.     If  a  corporation  fails  to  file  its 

report  of  condi- 

wtara.*"          ^  report  of  condition  within  thirty  days  after  the 
R:fcn6,§§§853,    3  date  of  its  annual  meeting  or  of  a  final  adjourn- 

o4» 

4  ment  thereof,  or  its  tax  return  before  the  tenth 

5  day  of  May   of  each  year,  the   commissioner 

6  of  corporations   or  the   tax   commissioner,  as 

7  the  case  may  be,  shall   give   notice   by   mail, 

8  postage  prepaid,  to  such  corporation  of  its  de- 

9  fault.     If  it  omits  to  file  such  report  or  return 

10  within  thirty  days  after  the  notice  of  default 

11  has  been   given  by  the    commissioner  ot  cor- 

12  porations  or  by  the  tax  commissioner,  it  shall 

13  forfeit  not   less   than  five  nor  more  than  ten 


on  Corporation  Laws.  107 

14  dollars  for  each  day  for  fifteen  days  after  the 

15  expiration   of  the   said   thirty   days,   and   not 

16  less  than  ten  nor  more  than  two  hundred  dol- 

17  lars  for  each  day  thereafter  during  which  such 

18  default   continues.     If  a  corporation   fails  for 

19  two  successive  years  to  file  its  annual  report 

20  of  condition,  the  supreme  judicial  court,  upon 

21  application   by  the   commissioner  of  corpora- 

22  tions,  after  notice  and  a  hearing,  may  decree 

23  a  dissolution  of  the  corporation. 

1  SECTION  49.     Penalties   or    forfeitures  in-  Enforcement 

or  penalties. 

2  curred  by  any  corporation  which,  being   sub-  58.L* 

3  ject  to   the   provisions   of  this   act,   omits  to 

4  cause  any  certificate  or  return  which  may  be 

5  required  by  the  provisions  of  sections   forty- 

6  four,  forty-seven,   fifty-nine   and   sixty-six,  to 

7  be   duly  filed  may  be  recovered  in  an  action 

8  brought  in  the  county  of  Suffolk  in  the  name 

9  of  the  commonwealth,  or  they  may  be  recov- 

10  ered  by  an  information  in  equity  in  the  name 

11  of  the  attorney-general  at  the  relation  of  the 

12  tax  commissioner  or  commissioner  of  corpora- 

13  tions,  as   the  case    may   be,   brought    in    the 

14  supreme  judicial    court  in  the  county  of  Suf- 

15  folk.     Upon  such  information,  the  court  may 

16  issue  an  injunction  restraining  the  further  prose- 

17  cution  of  the  business  of  the  corporation  named 

18  therein  until  such  penalties  or  forfeitures,  with 

19  interest  and  costs,  have  been  paid  and  until  the 

20  returns   and   certificates   required   by  this   act 

21  have  been  filed. 


108  Report  of  Committee 

DISSOLUTION   OP   CORPORATIONS. 

?oV8po>ratlo'nsof      1  SECTION  50.     A  corporation  which  desires  to 

2  close  its  affairs  may,  upon  the  affirmative  vote 

3  of  a  majority  of  all  its  stock,  or,  if  two  or  more 

4  classes  of  stock  have  been  issued,  of  a  major- 

5  ity  of  each  class  outstanding  and  entitled  to 

6  vote,  authorize   a  petition  for   its    dissolution 

7  to  be  filed  in  the   supreme  judicial   court   or 

8  the   superior  court   setting  forth  in  substance 

9  the  grounds  of  the  application,  and  the  court, 

10  after  notice  to  parties  interested  and  a  hearing, 

11  may    decree  a  dissolution  of  the  corporation. 

12  A  corporation  so  dissolved  shall  be  held  to  be 

13  extinct  in  all  respects  as  if  its  corporate  exist- 

14  ence    had    expired    by   the    limitation    of    its 

15  charter. 


Continuation 


fo°rnthree  years     1       SECTION     51.      Every     corporation    whose 

to  close  affairs. 

R.L.io9,§&3.     2  charter  expires  by  its  own  limitation  or  is  an- 

3  nulled  by   forfeiture   or    otherwise,   or  whose 

4  corporate  existence  for  other  purposes  is  ter- 

5  minated  in  any  other  manner,  shall  nevertheless 

6  be   continued  as  a   body  corporate   for    three 

7  years  after  the  time  when  it  would  have  been 

8  so  dissolved,  for  the  purpose  of  prosecuting  and 

9  defending  suits  by  or   against   it    and  of  en- 

10  abling  it  gradually  to  settle  and  close  its  affairs, 

11  to   dispose   of  and  convey  its  property  and  to 

12  divide  its  capital  stock,  but  not  for  the  purpose 

13  of  continuing  the  business  for  which   it  was 

14  established. 


on  Corporation  Laws.  109 


1  SECTION  52.      If  the  charter  of  a  corpora-  if^Yo"  '§  54. 

2  tion  expires  or  is  annulled,  or  if  the  corporation 

3  is  dissolved,  or  if  a  judgment  has  been  recov- 

4  ered  against  it  and  it  has  neglected,  for  thirty 

5  days  after  demand  made  on  execution,  to  pay 

6  the   amount  due,  with  the  officer's  fees,  or  to 

7  exhibit   to  the   officer   real  or  personal  prop- 

8  erty  belonging  to  it  and   subject  to  be  taken 

9  on  execution,  sufficient  to  satisfy  the  same,  and 

10  the    execution   has   been  returned  unsatisfied, 

11  the  supreme  judicial  court  or  the  superior  court 

12  shall  have  jurisdiction  in  equity  upon  applica- 

13  tion   of  a   creditor  or  stockholder,  to  appoint 

14  one  or  more  receivers   to   take   charge   of  its 

15  estate  and  effects  and  to  collect  the  debts  and 

16  property  due  and  belonging  to  it;  with  power 

17  to  prosecute  and  defend  suits  in  its  name   or 

18  otherwise,  to  appoint  agents  under  them  and  to 

19  do  all  other  acts  which  might  be  done  by  such 

20  corporation,  if  in  being,  which  may  be  neces- 

21  sary  for   the  final  settlement  of  its  unfinished 

22  business.     The  powers  of  such  receivers  may 

23  be  continued  as  long  as  the  court  finds  neces- 

24  sary  for  said  purposes. 


SECTION    53.     The   receivers   shall  pay  all 

2  debts  due  from  the  corporation  if  the  funds  in  «"r. 

R.  L.  110,  §  65. 

3  their  hands  are  sufficient  therefor;  and  if  they 

4  are   not,   they    shall    distribute    them  ratably 

5  among  the  creditors  who  prove  their  debts  in 

6  the  manner  directed  by  any  decree  of  the  court 

7  for  that  purpose.      If  there  is  a   balance  re- 


110 


Report  of  Committee 


8  maining  after    the  payment  of  the  debts,  the 

9  receivers  shall  distribute  and  pay  it  to  those 

10  who  are  justly  entitled  thereto  as  having  been 

11  stockholders  of  the  corporation,  or  their  legal 

12  representatives. 


Returns  to 
secretary  of 
dissolution . 
R.  L.  110,  §  57. 


1  SECTION  54.     If  a  corporation  is  dissolved, 

2  the  clerk  of  the  court  in  which  the  decree  for 

3  dissolution   has   been   entered    shall   forthwith 

4  make   return  thereof  to  the   secretary   of  the 

5  commonwealth,  giving  the   name   of  the   cor- 

6  poration   dissolved   and  the   date   upon  which 

7  such  decree  was  entered. 


Foreign  cor- 
porations 
defined . 
R.L.  126,  §1. 


FOREIGN   CORPORATIONS. 

1  SECTION  55.     The   term   "  foreign  corpora- 

2  tion  "  as  used  in  this  act  shall  mean  every  cor- 

3  poration,  association  or  organization  which  has 

4  been  established,  organized  or  chartered  under 

5  laws  other  than  those  of  the  commonwealth  for 

6  purposes  for  which  domestic  corporations  are 

7  authorized  under  the  provisions  of  this  act. 


Limitation  of 

business. 

K.  L.  126,  §  2. 


1  SECTION  56.     No   such  foreign   corporation 

2  shall  engage  or  continue  in  any  kind  of  busi- 

3  ness  in  this  commonwealth  the  transaction  of 

4  which  by  domestic  corporations  is  not  permitted 

5  by  the  laws  of  this  commonwealth. 


Appointment 
of  attorney. 
R.  L.  126,  §  4. 


1  SECTION  57.    Every  such  foreign  corporation 

2  which  has  a  usual   place  of  business   in  this 

3  commonwealth,  or  which  is   engaged  in   this 


on  Corporation  Laws.  Ill 

4  commonwealth,    permanently    or    temporarily, 

5  and  with  or  without  a  usual  place  of  business 

6  therein,  in  the  construction,  erection,  alteration 

7  or  repair  of  a  building,  bridge,  railroad,  rail- 

8  way   or   structure  of  any   kind,   shall,   before 

9  doing  business  in  this  commonwealth,  in  writ- 

10  ing    appoint  the  commissioner  of  corporations 

11  and  his  successor  in  office  to  be  its  true  and 

12  lawful  attorney  upon  whom  all  lawful  processes 

13  in   any  action  or  proceeding  against  it  may  be 

14  served,  and  in  such  writing  shall   agree   that 

15  any  lawful  process  against  it  which  is  served 

16  on  said  attorney  shall  be  of  the  same  legal  force 

17  and  validity   as  if  served  on  it,  and   that  the 

18  authority  shall  continue  in  force  so  long  as  any 

19  liability  remains  outstanding  against  it  in  this 

20  commonwealth.      The  power  of  attorney   and 

21  a  copy  of  the  vote  authorizing  its  execution, 

22  duly  certified  and  authenticated,  shall  be  filed 

23  in   the  office  of  the  commissioner,  and  copies 

24  certified   by   him   shall  be   sufficient  evidence 

25  thereof.     Service  of  such  process  shall  be  made 

26  by  leaving  a  copy  of  the  process  and  a  fee  of 

27  two  dollars  in  the  hands  or  in  the  office  of  the 

28  commissioner,  and  such  service   shall  be  suf- 

29  ficient  service  upon  the  corporation. 


1       SECTION  58.      When  legal  process  against 


2  any  such  corporation  has  been  served  upon  the 

3  commissioner,  he  shall  immediately  give  notice 

4  to  the   corporation   of  such   service  by   mail, 

5  postage   prepaid,   directed,   in  the   case   of  a 


112  Report  of  Committee 

6  corporation   established   in   a  foreign  country, 

7  to  the  resident  manager,  if  any,  in  the  United 

8  States;  and  shall,  within  two  days  after  such 

9  service,   in   the  same   manner  forward  a  copy 

10  of  the  process  served  upon  him  to  such  cor- 

11  poration  or  manager,  or  to  any  other  person 

12  designated  by  the  corporation  by  written  notice 

13  filed  in  the  office  of  the  commissioner.     The 

14  fee  of  two  dollars  paid  by  the  plaintiff  to  the 

15  commissioner  at  the  time  of  the  service  shall  be 

16  taxed  in  his  costs,  if  he  prevails  in  the  suit. 

17  The  commissioner  shall  keep  a  record  of  the 

18  day  and  hour  of  the  service  of  all  such  processes. 

S2?rte?|by.        1       SECTION  59.     Every  such  corporation  shall, 

laws  and  certifi.       _  .  . 

cate  to  be  filed.     2  before  transacting  business    in  this   common- 

K,  Li.  l'2o,  §  b. 

3  wealth,  file  with  the  commissioner  of  corpora- 

4  tions   a  copy    of  its  charter   or   certificate   of 

5  incorporation,  certified  under  the  seal   of  the 

6  state  or  country  in  which  such  corporation  is 

7  incorporated  by  the  secretary  of  state  thereof 

8  or  by  the  officer  having  charge  of  the  original 

9  record  therein,  a  true  copy  of  its  by-laws,  and 

10  a  certificate  in  such  form  as  the  commissioner 

11  of  corporations  may  require,  setting  forth  (a) 

12  the  name  of  the  corporation;  (5)  the  location 

13  of  its  principal  office;  (c)  the  names  and  the 

14  addresses  of  its  president,  treasurer,  clerk  or 

15  secretary  and  of  the  members  of  its  board  of 

16  directors;   (cT)  the  date  of  its  annual  meeting 

17  for  the  election   of  officers;    (e)    the  amount 

18  of  its    capital    stock,   authorized    and    issued, 

19  the  number  and  par  value  of  its  shares,   the 


on  Corporation  Laws.  113 

20  amount  paid  in  thereon  to  its  treasurer,  and, 

21  if  any  part  of  such  payment  has  been  made 

22  otherwise   than   in    money,   of   the    details    of 

23  such  payment,  so  far  as  practicable,  in  accord- 

24  ance    with   the   provisions   of   section    eleven. 

25  Said  certificate  shall  be  subscribed  and  sworn 

26  to  by  its  president,  treasurer  and  by  a  majority 

27  of  its  directors  or  officers  having  the  powers 

28  usually   exercised   by   directors.     The    officers 

29  and    directors    of   foreign   corporations   which 

30  do  business  in  this  commonwealth  and  which 

31  are  subject  to  the  provisions  of  this  act  shall 

32  be  subject  to  the  same  penalties  and  liabilities 

33  for  false  and  fraudulent  statements  and  returns 

34  as  officers  and  directors  of  corporations  organ- 

35  ized    under    the   laws   of  this   commonwealth. 

36  Every  officer  of  such  a  corporation  which  fails 

37  to  comply  with  the  requirements  of  this  section 

38  and  of   section   sixty- six,  and   every  agent  of 

39  such  corporation  who  transacts  business  as  such 

40  in  this  commonwealth  shall,  for  such  failure,  be 

41  liable  to  a  fine  of  not  more  than  five  hundred 

42  dollars.       Such    failure    shall    not    affect    the 

43  validity   of  any  contract   with    such   corpora- 

44  tion,   but   no    action    shall   be    maintained    or 

45  recovery  had  in  any  of  the  courts  of  this  com- 

46  mon wealth   by   any  such    foreign   corporation 

47  so  long  as  it  fails  to  comply  with  the  require- 

48  ments  of  said  sections. 


1       SECTION   60.     The   commissioner  of  corpo-  investigation 

as  to  kind  of 


2  rations  shall  refuse  to  accept  or  file  the  charter, 

O  r  -  R.  L.l26,  §7. 

o  certificate  or  other  papers  of,  or  accept  appoint- 


114 


Report  of  Committee 


4  ment   as    attorney   for    service    for,    any   such 

5  corporation  which  does  a  business  in  this  com- 

6  monwealth  the  transaction  of  which  by  domes- 

7  tic  corporations  is  not  then  permitted   by  the 

8  laws  of  this  commonwealth. 


Names  of 
foreign  cor- 
porations 
regulated. 
R.  L.  126,  §  8. 


1  SECTION  61.     A  foreign  corporation  which 

2  carries  on  a  banking,  mortgage,  loan  and  in- 

3  vestment    business    shall    indicate    in    letters 

4  equally  conspicuous   with  its   name,  upon   all 

5  signs,  advertisements,  circulars,  letterheads  and 

6  other  documents  which  contain   its  name,  the 

7  state  or  country  in  which   it   is  chartered  or 

8  incorporated.      No    such    corporation  and  no 

9  person  who  is  engaged  in  such  business  shall 

10  carry  it  on  under  a  name  which,  previous  to 

11  such  use,  was  in  lawful  use  by  a  corporation 

12  which  was  established  under  the  laws  of  this 

13  commonwealth  and  was  carrying  on  the  same 

14  or  a  similar  business  or  in  or  under  a  name  so 

15  similar  thereto  as  to  be  liable  to  be  mistaken 

16  for  it.     The  supreme  judicial   court   and  the 

17  superior  court  shall  have  jurisdiction  in  equity 

18  to  enforce  the  foregoing  provisions  of  this  sec- 

19  tion.     Whoever  violates  the  provisions  of  this 

20  section  shall  be  punished  by  a  fine  of  not  more 

21  than  one  thousand  dollars. 


^       SECTION   62.      Foreign   corporations   which 
their  p^oapnedrty      2  have   property  in  this  commonwealth  shall  be 

attached. 

R.L.i26,§9.      3  liable  to  be  sued  and  to  have  their  property 
4  attached  in  the  same  manner  and  to  the  same 


on  Corporation  Laws.  115 

5  extent   as  natural  persons   who   are  residents 

6  of  other  states  'and  who  have  property  in  this 

7  commonwealth.     The  service  of  the  writ  shall 

8  be  made  in  the  manner  provided  in   chapters 

9  one  hundred  and  sixty-seven  and  one  hundred 

10  and  seventy  of  the  Revised  Laws,  with  such 

11  further  service  as  the  court  to  which  the  writ  is 

12  returnable  may  order. 

1  SECTION  63.     Foreign  manufacturing  corpo-  fa°/tSgmca0nru* 

2  rations  which  have  complied  with  the  provisions  hSSertJL 

R.  L.  126,  §  10. 

3  of  sections  fifty-seven  and  fifty-nine  may  pur- 

4  chase  and  hold  such  real  estate  in  this  com- 

5  monwealth  as  may  be  necessary  for  conducting 

6  their  business. 


1       SECTION  64.     If  a  foreign  corporation  which  issue  of  stock 

on  domestic 


2  owns  or  controls  a  majority  of  the  capital  stock 

R.  L.  126,  §  It 

3  of  a  domestic  street  railway,  gas  light  or  elec- 

4  trie   light   corporation   issues    stock,  bonds   or 

5  other  evidences  of  indebtedness  based  upon  or 

6  secured  by  the  property,  franchise  or  stock  of 

7  such  domestic  corporation,  unless  such  issue  is 

8  authorized  by  the  laws  of  this  commonwealth, 

9  the  supreme  judicial  court  shall  have  jurisdic- 

10  tion  in  equity  in  its  discretion  to  dissolve  such 

11  domestic   corporation.      If   it    appears   to   the 

12  attorney-general  that  such  issue  has  been  made, 

13  he  shall  institute  proceedings  for  the  dissolu- 

14  tion   of  such  corporation  and   for   the   proper 

15  disposition  of  its  assets.     The  provisions  of  this 

16  section  shall  not  affect  the  right  of  foreign  cor- 


116  Report  of  Committee 

17  porations,  their  officers  or  agents  to  issue  stock 

18  and  bonds  in  fulfilment  of  contracts   existing* 

19  on   the    fourteenth   day   of  July   in   the   year 

20  eighteen  hundred  and  ninety-four. 

8S!SXof       1       SECTION  65.     All  foreign  corporations  which 
B.L.i26,§i2.     2  are  subject  to  the  provisions  of  this  act,  and 

3  which  have  a  usual   place  of  business  in  this 

4  commonwealth  other  than  an  office  or  agency 

5  for  the  transfer  of  stock,  and  including  such 

6  foreign   corporations   as   are   engaged   in    the 

7  business  of  selling  or  negotiating  bonds,  mort- 

8  gages,  notes  or   other  choses  in  action   shall, 

9  within  thirty  days  after  the  payment  in  of  an 

10  increase  of  capital  stock,  file   in   the  office  of 

11  the  secretary  of  the   commonwealth  a  certifi- 

12  cate  of  the  amount  of  such  increase  and  the 

13  fact  of  such  payment,  signed  and  sworn  to  by 

14  its  president,  treasurer  and  a   majority  of  its 

15  directors  or  officers  having  the  powers  usually 

16  exercised   by   directors.      Within    thirty   days 

17  after  the  vote  of  such  corporation  authorizing 

18  a  reduction  of  its  capital  stock,  a  copy  of  such 

19  vote,  signed  and  sworn  to  by  the  clerk  of  the 

20  corporation,  shall  be  filed  in  the  office  of  the 

21  secretary  of  the  commonwealth. 


dition. 


1       SECTION    66.      Every    foreign    corporation 

. 

B.L.i26,§i3.      2  which  is  subject  to  the  provisions  of  the  pre- 

3  ceding  section  shall  annually,  within  thirty  days 

4  after  the  date  fixed  for  its  annual  meeting  last 

5  preceding  the  date  of  such  certificate,  or  within 


on  Corporation  Laws.  117 

6  thirty  days  after  the  final  adjournment  of  said 

7  meeting,  but  not  more  than  three  months  after 

8  the  date  so  fixed  for  said  meeting,  prepare  and 

9  file  in  the  office  of  the  secretary  of  the  com- 

10  monwealth  a  certificate  signed  and  sworn  to  by 

11  its  president,  treasurer  and  by    a  majority  of 

12  its  board  of  directors  showing  the  amount  of 

13  its  authorized  capital  stoek,  and  its  assets  and 

14  liabilities  as  of  a  date  not  more  than  sixty  days 

15  prior  to  said  annual  meeting,  in  such  form  as 

16  is  required  of  domestic  corporations  under  the 

17  provisions  of  section  forty-four,  and  the  change 

18  or   changes,   if   any,  in   the   other   particulars 

19  included  in  the  certificate  required  by  section 

20  fifty-nine  made  since  the  filing  of  said  certi- 

21  ficate  or  of  the  last  annual  report. 

1  SECTION  67.     A  certificate  which  is  required  ^?tdof 

2  to  be  filed  by  sections  sixty-five  and  sixty-six 

3  shall  be   accompanied  by  a  written  statement 

4  under  oath  by  an  auditor,  as  provided  in  sec- 

5  tion   forty-six.     Before   it  is  filed,  it  shall  be 

6  submitted  to  the  commissioner  of  corporations 

7  together  with  the  evidences  of  the  payment  of 

8  any  taxes  which  may  have  been  assessed  upon 

9  the   corporation   by  any   city  or  town   in  the 

10  commonwealth   for   the    year    last    preceding. 

11  The  commissioner  of  corporations  shall  exam- 

12  ine  said  certificate  and  said  evidences  and  shall 

13  assess  upon  the  corporation   an   excise  tax,  if 

14  any  is  due,  in  accordance  with  the  provisions 

15  of  section  seventy-seven.     If  he  finds  that  the 


118  Report  of  Committee 

16  certificate  is  in   compliance  with   the   require- 

17  ments  of  sections  sixty-five  and   sixty-six,  he 

18  shall  endorse  his  approval  thereon;  but  no  cer- 

19  tificate  shall  be  filed  until  he  has  indorsed  his 

20  approval  thereon  and  until  the  excise  tax,  if 

21  any  is  due,  and   the   fee   required  by   section 

22  ninety-two,  has  been  paid  to  the  treasurer  and 

23  receiver  general. 


1  SECTION  68.     A  foreign  corporation  which  is 

B.L.  126,  §15. 

2  subject  to  the  provisions  of  section  sixty-five, 

3  which  omits  to  file  the  certificate  required  by 

4  section  sixty-six,  shall  forfeit  not  less  than  five 

5  nor  more  than  ten  dollars  for  each  day  for  fifteen 

6  days  after  the  expiration  of  the  period  therein 

7  named,  and  not  less  than  ten  nor  more  than 

8  two  hundred  dollars  for  each  day  thereafter, 

9  during  which  such  omission  continues,  which 

10  shall  be  recovered  as  provided  in  section  f  orty- 

11  nine. 

fe°tocquent         -^       SECTION  69.     The  commissioner  of  corpora- 
R.rL0i26°§'i6.     2  tions,  upon  the  failure  of  any  such  corporation 

3  to  file  the  certificate  required  by  section  sixty- 

4  six,  shall  forthwith  notify  such  corporation,  and 

5  the  notice  shall  contain  a  copy  of  this  and  the 

6  four  preceding  sections  and  of  section  forty  - 

7  nine. 


1       SECTION  70.     The  officers  and  stockholders 
B?Lkhi26,e§rii7.     2  of  such  foreign  corporations  shall  be  liable  on 
3  the  same  conditions  and  in  the  same  manner 


on  Corporation  Laws.  119 

4  as   is   provided   for  domestic   corporations  by 

5  sections  fourteen,  thirty-two,  thirty-three  and 

6  thirty-four. 

1  SECTION  71.     The    extent,   conditions    and  onSuy?1 

R.  L.  12^  §  19. 

2  manner  of  enforcing  the  liability  imposed  by 

3  the  preceding  section  for  the  debts  or  contracts 

4  of  the  corporation  shall  be  the  same  as  is  pro- 

5  vided  in  the  case  of  domestic  corporations  by 

6  sections  thirty-five,  thirty-six,  thirty-seven  and 

7  thirty-eight. 

TAXATION. 

1  SECTION  72.    Every  corporation  which  is  or-  Local  taxation. 

2  ganized  under  the  laws  of  this  commonwealth 

3  and  which  is  subject  to  the  provisions  of  this 

4  act  shall  be  subject  'to  taxation  upon  all  real 

5  estate  and  machinery  owned  by  it  and  situated 

6  in  this  commonwealth  by  the  city  or  town  in 

7  which  said  real  estate  or  machinery  is  situated, 

8  and  every  foreign  corporation  which  is  subject 

9  to  the  provisions  of  this  act  shall  be  subject  to 

10  taxation  upon  all   real  estate,  machinery  and 

11  merchandise  owned  by  it  and  situated  in  this 

12  commonwealth  by  the  city  or  town  in  which 

13  such  property  is  situated.     The  taxes  author- 

14  ized  by  the  provisions  of  this  section  shall  be 

15  assessed,  collected  and  paid  in  accordance  with 

16  the  provisions  of  chapters  twelve  and  thirteen 

17  of  the  Revised  Laws. 


1  SECTION  73.      The  tax  commissioner  shall 

,     .          _  .        _   franchise. 

2  annually  ascertain   from  the  returns  required 


120  Report  of  Committee 

3  by  section  forty-four,  or  in  any  other  manner, 

4  the  true  market  value  of  the  shares  of  the  capi- 

5  tal  stock  of  each  domestic  corporation  which  is 

6  subject  to  the  provisions  of  this  act  and  shall 

7  estimate  therefrom  the  fair  cash  value  of  all  of 

8  the  shares  constituting  its  capital  stock  on  the 

9  preceding  first  day  of  May,  which  shall,  for  the 

10  purposes  of  this  act,  be  taken  as  the  true  value 

11  of  its  corporate  franchise.     From  such  value 

12  there  shall  be  deducted  the  value  as  found  by 

13  the  tax  commissioner  of  its  real  estate  and  ma- 

14  chinery  within   the  commonwealth  subject  to 

15  local  taxation  and  of  securities  which,  if  owned 

16  by  a  natural  person  resident  in  this  common- 

17  wealth,  would  not  be  liable  to  taxation;  also  the 

18  value  as  found  by  the  tax  commissioner  of  its 

19  property  situated  in  another  state  or  country 

20  and  subject  to  taxation  therein,  excepting  secu- 

21  rities  which,  if  owned  by  a  natural  person  resi- 

22  dent  in  this  commonwealth,  would  be  liable  to 

23  taxation.     For  the  purposes  of  this  section,  he 

24  may  take  the  value  at  which  such  real  estate 

25  and  machinery  is  assessed  in  the  city  or  town 

26  where  it  is  situated  as  its  true  value,  but  such 

27  local  assessment  shall  not  be  conclusive  of  its 

28  value. 


1  SECTION  74.     The  tax  commissioner  may  re- 

R.  L.  14,  §  39. 

2  quire  a  corporation  to  prosecute  an  appeal  rrom 

3  the  valuation  of  its  real  estate  or  machinery  by 

4  the  assessors  of  a  city  or  town,  either  to  the 

5  county  commissioners  or  to  the  superior  court, 


on  Corporation  Laws.  121 

6  whose   decision  shall  be   conclusive  upon  the 

7  question  of  value.     Upon  such  appeal  the  tax 

8  commissioner  may  be  heard,  and  in  the  superior 

9  court  costs  may  be  awarded  as  justice  requires. 

1  SECTION  75.     Every    domestic    corporation  Taxation 

of  corporate 

2  which  is  subject  to  the  provisions  of  this  act  E?iHbu,e§  40. 

3  shall  in  each  year  pay  to  the  treasurer  and  re- 

4  ceiver  general  a  tax  upon  the  value  of  its  cor- 

5  porate  franchise,  after  making  the  deductions 

6  provided  for  in  section  seventy-three,  at  a  rate 

7  to  be  determined  by  an  apportionment  of  the 

8  whole  amount  of  money  to  be  raised  by  taxa- 

9  tion  upon  property  in  the  commonwealth  dur- 

10  ing  the  same  year  as  returned  by  the  assessors 

11  of  the  several  cities  and  towns  under  the  pro- 

12  visions  of  section  ninety-three  of  chapter  twelve 

13  of  the  Revised  Laws,  after   deducting  there- 

14  from  the  amount   of  tax   assessed   upon  polls 

15  for  the  preceding  year,  as  certified  to  the  sec- 

16  retary,   upon   the    aggregate   valuation   of  all 

17  cities  and   towns   for  the   preceding   year   as 

18  returned  under    sections   sixty   and   sixty-one 

19  of  said  chapter  of  the  Revised  Laws;    but  if 

20  the   return  from  any  city  or   town  is   not  re- 

21  ceived  prior  to  the  twentieth  day  of  August, 

22  the  amount  raised  by  taxation  in  said  city  or 

23  town   for  the  preceding  year,  as   certified   to 

24  the   secretary  of   the   commonwealth,  may  be 

25  adopted  for  the  purpose  of  this  determination. 

26  But  the  total  amount  of  tax  to  be  paid  by  such 

27  corporation  in  any  year  upon  its  property  lo- 


122 


Report  of  Committee 


28  cally  taxed  in  this  commonwealth  and  upon  the 

29  value  of  its  corporate  franchise  shall  amount  to 

30  not  less  than  one-tenth  of  one  per  cent  of  the 

31  true  market  value  of  its  capital   stock  at  the 

32  time  of  said   assessment  as  found   by  the  tax 

33  commissioner. 


Taxation  of 
foreign  corpora- 
tions. 


Remedy  of 
corporation 
if  assessors' 
valuation 
exceeds  tax 
commissioner's. 
R.  L.  14,  §  42. 


1  SECTION   76.      Every    foreign     corporation 

2  which   is  subject  to  the   provisions  of  section 

3  sixty-five   shall,  in   each  year,  at  the  time   of 

4  filing  its  annual  certificate  of  condition,  pay  to 

5  the  treasurer  and  receiver  general,  for.  the  use 

6  of  the  commonwealth,  an  excise  tax  to  be  as- 

7  sessed  by  the  tax   commissioner   of  one-hun- 

8  dredth  of  one  per  cent  of  the  par  value  of  its 

9  authorized  capital  stock  as  stated  in  its  annual 

10  certificate  of  condition;  but  it  may  deduct  from 

11  such  tax  the  amount   of  taxes  upon  property 

12  paid  by  it  to  any  city  or  town  in  the  common- 

13  wealth   during   the    preceding   year,   and   the 

14  amount  of  such  excise  tax  shall  not  in  any  one 

15  year  exceed  the  sum  of  two  thousand  dollars. 

1  SECTION  77.     If  the  value  of  the  real  estate 

2  and  machinery  of  a  domestic  corporation  which 

3  is  subject  to  local  taxation  within  the  common- 

4  wealth,  as  determined  by  the  tax  commissioner, 

5  is  less  than  the  value  thereof  as  determined  by 

6  the  assessors  of  the  city  or  town  in  which  it  is 

7  situated,  he  shall  give  notice  of  his  determina- 

8  tion   to   such   corporation;    and,  unless  within 

9  one  month  after  the  date  of  such  notice  it  ap- 


on  Corporation  Laws.  123 

10  plies  to   said  assessors  for  an  abatement  and, 

11  upon  their  refusal  to  grant  an  abatement,  pros- 

12  ecutes  an  appeal  under  the  provisions  of  section 

13  seventy-seven   of   chapter  twelve  of  the   Re- 

14  vised  Laws,    giving  notice  thereof  to  the  tax 

15  commissioner,   the   valuation   of  said  commis- 

16  sioner  shall  be  conclusive  upon  said  corpora- 

17  tion. 

1  SECTION  78.     The   tax   commissioner   shall,  R?L?ei4,  §5!' 

2  annually,    as   soon  as  may  be   after    the   first 

3  Monday  of  August,  give  notice  to  the  treasurer 

4  of  every  domestic  corporation  which  is  liable  to 

5  a  tax  under  the  provisions  of  section  seventy- 

6  five  of  the  amount  thereof,  that  it  will  be  due 

7  and  payable  to  the  treasurer  and  receiver  gen- 

8  eral  within   thirty  days  after  the  date  of  such 

9  notice,  but  not  before  the  first  day  of  Novem- 

10  ber;  and  that,  within  ten  days  after  the  date  of 

11  such  notice,  the  corporation  may  apply  for  a 

12  correction  of  said  tax  and  be  heard  thereon  by 

13  the  board  of  appeal  authorized  by  the  provi- 

14  sions  of  section  sixty-five  of  chapter  fourteen 

15  of  the  Revised  Laws. 

1  SECTION  79.     Taxes  which  are  assessed  under  collection  of 

2  the  provisions    of   this    act   may  be   recovered  R 

3  by  the  treasurer   and   receiver   general   in  an 

4  action  of  contract  brought  in  the  name  of  the 

5  commonwealth  or  they  may  be  collected  by  an 

6  information  brought   in    the   supreme  judicial 

7  court  by  the  attorney-general   at   the   relation 


124 


Report  of  Committee 


Interest  on 
unpaid  taxes. 
R.  L.  14,  §  56. 


8  of  the   treasurer   and    receiver   general.     The 

9  court  may  issue  an  injunction  upon  such  in- 

10  formation  restraining  the   further   prosecution 

11  of  the  business  of  such  corporation  until  such 

12  taxes  with  interest  and  costs  thereon  have  been 

13  paid. 

1  SECTION  80.     Corporations  which  neglect  to 

2  pay  the  taxes  assessed  under  the  provisions  of 

3  this  act  shall  pay  interest  at   the  rate  of  six 

4  per  cent  per  annum  from  the  time  when  such 

5  taxes  were  payable  until  such  payment  is  made 

6  if  such  payment  is  made  before  the  commence- 

7  ment  of  proceedings  for  the  recovery  thereof, 

8  and  twelve  per  cent,  if  made  after  the  recovery 

9  thereof. 


Liability  of 
lessee  for  tax. 
R.  L.  14,  §  60. 


Submission 
of  books  to 
inspection. 
R.  L.  14,  §  63. 


1  SECTION  81.     The  lessee  of  the  real  estate 

2  or  machinery  of  any  corporation  which  is  liable 

3  to   taxation   under   the   provisions  of  this   act 

4  shall  also  be  liable  for  the  payment  of  the  tax, 

5  and  upon  such  payment   may,  in  the  absence 

6  of  an  agreement  to  the  contrary,  retain  it  out 

7  of  the  rent  of  the  property  or  recover  it  in  an 

8  action  against  the  lessor. 

1  SECTION  82.     Every   domestic    corporation 

2  which   is   subject  to  taxation   under  the  pro- 

3  visions  of  this  act  shall,  when  required,  submit 

4  its  books  to  the  inspection  of  the  tax  commis- 

5  sioner  and    its  treasurer  and  directors  to  ex- 

6  amination    on    oath    relative    to    all    matters 


I 


on  Corporation  Laws.  125 

7  affecting   the    determinations  which  are  to  be 

8  made  by  said  commissioner.  • 


1  SECTION   83.     Any  party  who  is  aggrieved 

R.  L.  14,  §  65. 

2  by  a  decision   of  the  tax  commissioner   upon 

3  any  question   arising  under  the  provisions  of 

4  this  act  from  which  an  appeal  is  given  may, 

5  within  ten  days  after  notice   of  his  decision, 

6  apply   to   the   board  of  appeal  authorized   by 

7  section   sixty-five  of   chapter  fourteen  of    the 

8  Eevised  Laws.     Said  board  shall  hear  and  de- 

9  cide  the  subject-matter  of  said  appeal  and  give 

10  notice  of  its  decision  to  the  tax  commissioner 

11  and  to  the  appellant;  and  its  decision  shall  be 

12  final  and  conclusive,  although  payments  have 

13  been  made  as  required  by  the  decision  appealed 

14  from.     Any  over-payment   of  tax   determined 

15  by  decision  of  said  board  of  appeal   shall  be 

16  reimbursed  from  the  treasury  of  the  common- 

17  wealth. 

1  SECTION   84.     If   a   tax    or    excise   of    any  collection  of 

tax  by  warrant. 

2  kind    remains    due   to   or   is   claimed   by   the  R-  L-  14>  §  66* 

3  commonwealth  from  any  domestic  corporation 

4  which  is  subject  to  the  provisions  of  this  act 

5  for  ten  days  after  notice  given  through  the  mail 

6  by  the  treasurer   and   receiver   general   to  its 

7  treasurer   or  other   financial    agent   that   such 

8  tax  or  excise  is  due  and  unpaid,  the  treasurer 

9  and    receiver    general,   in    addition    to    other 

10  methods   of    relief,    may    issue    his    warrant, 

11  directed  to  the  sheriff  or  his  deputies  of  the 


126  Report  of  Committee 

12  county  in  which  the  principal  office  of  the  cor- 

13  poration  is  located,  commanding  the  collection 

14  of  such  tax  or  excise.     Such  warrant  may  be 

15  substantially  in  the  form  of  and  served  in  the 

16  same  manner  as  those  issued  by  assessors  of 

17  towns.     It  shall  not  run  against  the  body  of 

18  any  person,  but  no  property  of  such  delinquent 

19  corporation  shall  be  exempt  from  seizure  and 

20  sale  thereon.     The  officer  having  such  warrant 

21  shall   collect   such   tax  or  excise  and  interest 

22  thereon   at  the    rate  of  twelve   per  cent  per 

23  annum  from  the  time  when  such  tax  or  excise 

24  became  due,  and  may  collect  and  receive  for  his 

25  fees  the  sum  which  an  officer  would  be  entitled 

26  by  law  to  receive  upon  an  execution  for  a  like 

27  amount.     He  shall  also  collect  one  dollar  for 

28  the  warrant  which  shall  be  paid   over  to  the 

29  treasurer  and  receiver  general. 


X 


1       SECTION   85.     A  corporation   which  is   ag- 
RL.  w,  §  67.      2  grieved  by  the  exaction  of  such  tax  or  excise, 

3  or   of    any   portion   thereof  may,    within    six 

4  months  after  its  payment,  whether  such  pay- 

5  ment  be  before  or  after  the  issue  of  the  war- 

6  rant  mentioned  in  the  preceding  section,  apply 

7  by  petition  to   the  supreme  judicial  court  set- 

8  ting  forth  the  amount  of  the  tax  or  excise  and 

9  costs  thereon  which  have  been  paid,  the  general 

10  legal  grounds  and  the  specific  grounds  in  fact, 

11  if  any,  upon  which  it  alleges  that  such  tax  or 

12  excise   should   not  have   been  exacted.     Said 

13  petition  shall  be  the  exclusive  remedy  and  shall 


on  Corporation  Laws.  127 

14  be   entered  and  determined  in  the  county  of 

15  Suffolk.     A  copy  of  the  petition  shall  be  served 

16  upon  the    treasurer  and  receiver  general  and 

17  upon  the  attorney-general,  and  the  proceedings 

18  thereon  shall  conform  as  nearly  as  may  be  to 

19  proceedings  in  equity,  and  an  abatement  shall 

20  be  made  of  such  portion  of  the  tax  or  excise  as 

21  was  assessed  without  authority  of  law. 


1       SECTION  86.     If  the  court,  upon  a  hearing,  Reimbursement 

'     of  tax  illegally 


2  adjudges  that  such  tax  or  excise  and  the  costs  R.^U,  §  as. 

3  thereon  have  been  illegally  exacted,  a  copy  of 

4  the  judgment  or  decree  shall  be  transmitted 

5  by  the  clerk  of  the  court  to  the  auditor  of  the 

6  commonwealth,  who  shall  thereupon  audit  and 

7  certify  the  amount  adjudged  to  have  been  ille- 

8  gaily  exacted,  with  interest,  and  with  costs  to  be 

9  taxed  by  the  clerk  of  the  court  in  the   same 

10  manner  as  other  claims  against  the  common- 

11  wealth,  and  the  treasurer  and  receiver  general 

12  shall  pay  the  same  without  any  further  act  or 

13  resolve    making    appropriation    therefor.      So 

14  much  thereof  as  may  have  been  paid  from  the 

15  treasury  of  the  commonwealth  to  a»y  city  or 

16  town  may  be  deducted  from  and  set  off  against 

17  any  sum  afterward  payable  to  such  city  or  town. 

1  SECTION  87.     No  taxes  shall  be  assessed  in  Distribution 

of  tax. 

2  a  city  or  town  for  state,  county  or  town  pur-  R-L-14«§61- 

3  poses  upon  the  shares  in  the  capital  stock  of 

4  domestic  corporations  for  any  year  for  which 

5  they  pay  to  the  treasurer  and  receiver  general 


128  Report  of  Committee 

6  a  tax  on  the  value  of  their  corporate  franchises. 

7  Such  proportion  of  the  tax  collected  of  each 

8  of  said  corporations  as  corresponds  to  the  pro- 

9  portion  of  its  stock  owned  by  persons  residing 

10  in  this  commonwealth  shall  be  distributed,  cred- 

11  ited  and  paid  to  the  several  cities  and  towns 

12  in  which,  from  the  returns  or  other  evidence, 

13  it  appears  that  such    persons    resided  on  the 

14  preceding  first  day  of  May,  according  to  the 

15  number   of  shares   so  held  in  such  cities  and 

16  towns  respectively.      If   stock  is  held  by  co- 

17  partners,  guardians,   executors,  administrators 

18  or  trustees,  the  proportion  of  tax  correspond- 

19  ing  to  the  amount  of  stock  so  held  shall  be 

20  credited  and  paid  to  the  cities  and  towns  where 

21  the    stock  would  have   been  taxed   under  the 

22  provisions  of  clauses  four,  five,  six  and  seven 

23  of  section  twenty-three    and    section    twenty- 

24  seven  of  chapter  twelve  of  the  Revised  Laws. 


' 


1       SECTION   88.     The   tax  commissioner  shall, 
L'i4,§62.      2  subject  to  appeal  to  the   board  of  appeal   au- 

3  thorized  by  section  sixty-five  of  chapter  four- 

4  teen    of    the    Revised    Laws,     ascertain    and 

5  determine   the    amount   due  to  each  city  and 

6  town  under  the  provisions  of  this  section,  notify 

7  the  treasurer  of  each  city  and  town  thereof, 

8  and  certify  the  amount  as  finally  determined  to 

9  the  treasurer  and  receiver  general,  who  shall 
10  thereupon  pay  over  the  same. 


on  Corporation  Laws.  129 


ORGANIZATION   AND   PILING   FEES. 

1  SECTION  89.     The  fee  for  filing  and  record- 

R.  L.  110,  §  86. 

2  ing    the    articles   of  organization  required  by 

3  section    eleven,   including   the  issuing   by  the 

4  secretary  of  the  commonwealth  of  the  certifi- 

5  cate  of  incorporation,  shall  be  one-twentieth  of 

6  one  per  cent  of  the  total  amount  of  the  author- 

7  ized  capital  stock  as   fixed   by  the  articles   of 

8  organization;    but  not  in  any  case   less   than 

9  twenty-five  dollars. 


1       SECTION  90.     The  fee  for  filing  and  record-  ~f 


T>    T     i  in    &  fiA 

2  ing  the  certificate  required  by  section  forty-one 

3  providing   for   an    increase   of    capital    stock, 

4  shall  be  one-twentieth  of  one  per  cent  of  the 

5  amount  by  which  the  capital  is  increased. 


1       SECTION  91.     The  fees  for  filing    all  other  -for  an  other 

certificates, 


2  certificates,   statements  or  reports  required  by 

R.  L.  110,  §  86. 

3  law   shall   be  five  dollars  for  each  certificate, 

4  statement  or  report,  but  no  fee  shall   be  paid 

5  for  filing  the  annual   tax  return   required   by 

6  section  forty-seven. 

7  Fees  for  official  copies  of  any  of  the  records 

8  referred  to  in  this  act  shall  be  at  the  rates  now 

9  fixed  by  chapter  two  hundred  and  four  of  the 

10  Revised  Laws   for   copies    of    similar   records 

11  furnished  by  the  secretary  of  the  commonwealth. 


1  SECTION    92.      Every    foreign    corporation -for  foreign 

corporations. 

2  which  is  subject  to  the  provisions  of  this  act  Rt  L  126' §  20' 


130  Report  of  Committee 

3  shall  pay  to  the  officers  hereinafter  designated 

4  the  following   fees:    for   filing   a  copy   of  its 

5  charter,  by-laws  and  the  certificate  required  by 

6  section    fifty-nine,  twenty-five   dollars   to  the 

7  treasurer  and  receiver  general. 

8  For   filing   all   other  certificates  and   state- 

9  ments,  including  the  annual  certificate  of  con- 

10  dition  required  by  section  sixty-six,  five  dollars 

11  to  the  secretary  of  the  commonwealth. 

MISCELLANEOUS  PROVISIONS. 

S8Bocfagtion8.        1       SECTION   93.     A  corporation  which   is   or- 

R.  L.110,  §§8, 

56,71.  2  gamzed   for  the   purpose  or   opening   outlets, 

3  canals,  sluiceways  or  ditches  for  the  introduc- 

4  tion  and  propagation  of  herrings  and  alewives 

5  may  purchase  and   hold  real  estate   necessary 

6  for   opening   such   outlets,  canals,   sluiceways 

7  or  ditches;  but,  before  making  any  such  pur- 

8  chase   or  doing  any  acts  in  pursuance  of  its 

9  organization,   it  shall  obtain  the  authority  in 

10  writing  of  the  mayor  and  aldermen  of  the  city 

11  or  of  the  selectmen  of  the  town  within  which 

12  its  works  are  to  be  located,  and,  within  thirty 

13  days   after  obtaining  such   authority,   it  shall 

14  file  a  copy  thereof,  certified  by  the  city  or  town 

15  clerk,   in   the   office   of  the   secretary   of  the 

16  commonwealth. 


1  SECTION  94.      A  corporation  which   is   or- 

R.  L.  110,  §§  7, 

w'70-              2  gamzed   for   the    purpose   of    co-operation  in 

3  carrying  on  any  business  and  of  co-operative 

4  trade   shall  distribute   its   earnings   or   profits 


on  Corporation  Laws.  131 

5  among  its  workmen,    purchasers    and    stock- 

6  holders    at    such   times   and    in    such   manner 

7  as  its  by-laws  shall  prescribe,  but  as  often  at 

8  least  as  once  in  twelve  months.     No  distribu- 

9  tion  shall  be  made  unless  at  least  ten  per  cent 

10  of  the  net  profits  have  been  appropriated  for  a 

11  contingent  or  sinking  fund  until  an  amount  has 

12  accumulated   equal   to  thirty   per   cent  of   its 

13  capital  stock.     No  person  shall  hold  shares  in 

14  any  such  corporation  to  an  amount  exceeding 

15  one   thousand   dollars  at  their  par  value,  nor 

16  shall  a   stockholder  be  entitled  to  more  than 

17  one  vote  upon  any  subject. 

1  SECTION  95.     A  manufacturing   corporation  Free  beds  in 

2  may,  by  the  affirmative  vote  of  a  majority  of  R  L  no'§5°- 

3  all  its  stock,  or  if  two  or  more  classes  of  stock 

4  have  been  issued,  of  a  majority  of  each  class 

5  outstanding  and  entitled  to   vote,  appropriate 

6  not   more   than   five   thousand  dollars,   or   an 

7  annual   sum   of  not  more  than  five   hundred 

8  dollars,  for  the  support  of  free  beds  in  one  or 

9  more  hospitals  in   this  commonwealth  for  the 
10  use  of  its  employees. 

REPEAL. 

1  SECTION  96.     Sections  forty-nine,  fifty,  fifty-  Repeal. 

2  one,  fifty-two   and  sixty-nine  of  chapter  four- 

3  teen,    and   section   three    of  chapter    seventy 

4  of   the   Revised   Laws    are    hereby    repealed. 

5  Sections  thirty-seven,  thirty-eight,  thirty-nine,  Partial  repeal. 

6  forty,  forty-two,   fifty-four,  fifty-five,  fifty-six, 


132  Report  of  Committee  on  Corporation  Laws. 

1  fifty-seven,   fifty-eight,  fifty-nine,  sixty,  sixty- 

8  one,    sixty-two,    sixty-three,    sixty-six,    sixty- 

9  seven  and  sixty-eight  of  chapter  fourteen  and 

10  chapters   one  hundred  and  nine,  one  hundred 

11  and  ten  and   one    hundred  and   twenty-six  of 

12  the  Revised  Laws,  and  chapter  four  hundred 

13  and  forty-one  of  the  acts  of  the  year  nineteen 

14  hundred  and  two  and  all  other  acts  and  parts 

15  of  acts   inconsistent   herewith,  so   far  as  they 

16  apply  to  corporations  which  are  subject  to   the 

17  provisions  of  this  act,  are  hereby  repealed. 

of°aSraction       1       SECTION  97.     The  provisions  of  this  act,  so 

2  far  as  they  are  the  same  as  those  of  existing 

3  statutes    shall  be  construed    as  a  continuation 

4  thereof,   and    not    as   new  enactments,   and  a 

5  reference    in    a    statute    which    has  not  been 

6  repealed  to  provisions  of  law  which  have  been 

7  revised   and   re-enacted   herein  shall   be   con- 

8  strued  as  applying   to  such   provisions   as   so 

9  incorporated  in  this  act.     The  repeal  of  a  law 

10  by   this    act    shall    not    affect    any   act   done, 

11  ratified  or  confirmed,  or  any  right  accrued  or 

12  established,  or  any  action,  suit  or  proceeding 

13  commenced,  under  any   of  the  laws   repealed 

14  before  the  repeal  took  effect,  but  the  proceed- 

15  ings  in  such  case  shall,  when  necessary,  con- 

16  form  to  the  provisions  of  this  act. 

Date  of  taking      1       SECTION  98.     This  act  shall  take  effect  upon 

effect. 

2  its  passage. 


APPENDIX  A. 


A    DIGEST 


COKPOKATION    LAWS 


APPLICABLE  TO   BUSINESS   CORPORATIONS  IN   ALL 
THE   STATES  AND  TERRITORIES 


WITH   SPECIAL  REFERENCE   TO   TAXATION. 


PREPARED    FOR    THE   MASSACHUSETTS  COMMITTEE  ON  CORPORATION 

LAWS 


BY  FptEDERiCK   J.  MACLEOD. 


LETTER   OF   TRAXSMITTAL. 


To  the  Massachusetts  Committee  on  Corporation  Laws : 

I  have  the  honor  to  submit  herewith  a  compilation  of  the  stat- 
utes of  the  state  and  territorial  governments  relating  to  selected 
topics  in  the  law  of  business  corporations.  The  principle  of  selec- 
tion adopted  has  been,  broadly,  to  omit  matters  of  administration 
and  procedure,  and  to  include  matters  of  substantive  law  only. 

Part  I  deals  with  miscellaneous  laws  other  than  taxation.  These 
laws  raise  few  difficult  questions  of  construction.  They  are  for 
the  most  part  sufficiently  clear  as  they  stand,  and  the  aid  of  the 
case  law  has  rarely  been  required  to  interpret  them. 

On  the  other  hand,  the  law  of  corporate  taxation,  which  forms 
Part  II  of  this  report,  has  proved  of  unusual  difficulty.  Taxation 
is,  by  general  consent,  one  of  the  most  complex  departments  of 
the  law.  This  is  especially  true  in  regard  to  the  taxation  of  cor- 
porations. For  not  only  are  corporations,  as  persons,  within  the 
operation  of  the  general  law,  but  they  are  subject  to  other  pro- 
visions which  apply  either  to  all  corporations,  or  to  corporations 
of  each  separate  class.  It  is  often  left  doubtful  to  what  extent 
the  more  special  provisions  supersede,  and  to  what  extent  they 
merely  supplement  the  more  general  provisions.  The  law  can 
only  be  ascertained  by  inference  and  comparison,  by  the  adjust- 
ment of  general  propositions  with  various  restrictive  and  qualify- 
ing statements. 

These  and  other  difficulties  justify  the  assertion  that  "there  is 
no  subject  upon  which  greater  confusion  exists  in  the  statutes  of 
most  of  the  states  than  in  that  of  the  taxation  of  corporations. 
Under  many  of  the  general  revisions  it  is  almost  impossible  to  de- 
termine the  prevailing  law  without  making  a  special  legal  opinion 
for  each  point."  (Stimson's  American  Statute  Law,  page  149.) 

While  this  report  makes  no  attempt  to  cover  more  than  the 
statute  law,  the  uncertainty  of  the  law  is  such  that  it  has  been 
necessary  to  examine  the  reported  decisions  of  all  the  states  to 
learn  how  the  law  of  each  should  be  construed.  It  would  have 
been  easy  to  multiply  citations,  but  the  cases  cited  in  the  foot- 
notes will  usually  be  found  to  decide  squarely  the  point  in  issue. 
Many  points,  however,  are  left  unsolved,  and  it  has  been  difficult 


136  Digest  of  Corporation  Laws. 

to  determine  their  construction  by  any  fixed  legal  principles. 
Different  and  inconsistent  legal  and  economic  theories  have  been 
adopted  in  different  states,  and  I  cannot  hope  that  I  have  always 
been  successful  in  the  application  of  these  shifting  standards. 
The  greatest  care  has  been  taken,  by  the  use  of  all  available 
sources  of  information,  to  make  this  report  complete  and  accurate, 
and  in  the  main  it  may  be  accepted  as  reliable.  But  in  the 
absence  of  a  special  knowledge  of  the  practice  of  taxation  in  each 
state,  absolute  accuracy  in  all  matters  of  detail  is  impossible.  As 
this  report  represents  the  first  attempt  to  deal  with  this  question 
in  a  systematic  and  comprehensive  way,  little  help  could  be  de- 
rived from  any  text  book  or  treatise. 

Not  the,  least  difficult  problem  in  this  report  has  been  to  devise 
some  form  of  classification  that  would  include  all  the  varieties  of 
taxation  in  fifty  different  jurisdictions,  each  developing  the  gen- 
eral subject  by  a  peculiar  system,  and  along  independent  lines. 
The  present  scheme  was  adopted  only  after  various  other  forms 
of  classification  had  been  tried  and  found  to  break  down.  It 
leaves  much  to  be  desired  in  the  way  of  scientific  precision,  but  it 
is  the  best  that  has  seemed  possible  under  the  circumstances. 
It  has,  at  least,  the  merit  of  being  sufficiently  comprehensive  to 
include  the  multifarious  provisions  of  all  the  states  in  relation  to 
the  subjects  which  it  covers,  and  also  of  being  sufficiently  search- 
ing to  leave  no  shelter  for  evasion. 

This  report,  within  its  special  field,  is  meant  to  be  exhaustive. 
The  absence  of  any  state  from  any  list  of  citations  is  to  be  con- 
strued as  an  assertion  that  such  state  has  no  statute  on  the  sub- 
ject. But  if  the  common  law  recognizes  the  right  or  liability  in 
question,  the  law  as  administered  in  the  courts  may  be  the  same 
as  in  the  states  quoted. 

This  report  is  submitted  with  a  full  knowledge  of  its  imperfec- 
tions. But  while  the  time  and  effort  expended  in  its  preparation 
might  well  have  justified  a  better  result,  I  trust  that  in  so  far  as 
it  presents  the  law  in  a  clear,  orderly  and  accessible  form,  it  may 
prove  of  service  to  the  committee. 

FREDERICK  J.  MACLEOD. 


TABLE  OF  CONTENTS. 


PART  I. -MISCELLANEOUS  LAWS. 

i 

Chapter  I. 

GENERAL  RESTRICTIONS. 

PAGE 

TITLE    A.     FOR    WHAT    PURPOSES    CORPORATIONS    MAY    BE 

CREATED 157 

Art.  1.  The  authorized  purposes  are  broadly  defined  so  as  to 

include  practically  all  legitimate  enterprises  .  .  157 
Sec.  a.  For  any  purpose  or  purposes  whatsoever,  or  two  or 

more  combined  ........  158 

Sec.  b.  For  any  lawful  purpose 158 

Sec.  c.  For  any  purpose  for  which  individuals  may  lawfully 

associate  themselves 158 

Sec.  d.  For  any  purpose  or  business  useful  to  the  public  for 

which  a  firm  or  copartnership  may  be  lawfully 

formed        .........     158 

Sec.  e.  For  the  transaction  of  any  lawful  business  .  .  159 
Sec.  f .  To  constitute  an  ordinary  business  corporation  .  .  160 
Sec.  g.  For  any  purpose  intended  for  pecuniary  profit  .  160 

Art.  2.  Incorporation  is  authorized  for  certain  specific  purposes 

only 160 

Sec.  a.  For  the  transaction  of  any  kind  of  manufacturing, 

mining,  mechanical,  chemical  or  mercantile  business  161 
Sec.  b.  Mining,  manufacturing  or  other  industrial  pursuits  162 
Sec.  c.  For  the  trade  of  merchants  and  for  mining,  boring, 

manufacturing  and  other  specified  purposes    .        .     162 


138  Digest  of  Corporation  Laws, 

PAGE 

Sec.  d.  For  manufacturing  and  mining  and  the  purchase  and 
sale  of  goods,  wares  and  merchandise,  used  for  such 
business.  Also  for  buying  and  selling  goods,  wares 
and  merchandise  by  wholesale,  or  wholesale  and 
retail ;  and  for  other  specified  purposes  .  .  .  162 
TITLE  B.  LIMITATIONS  ON  CORPORATE  EXISTENCE  .  .  .162 

Art.  1.  Twenty  years 163 

Art  2.  Twenty-five  years 163 

Art.  3.  Thirty  years 163 

Art.  4.  Forty  years 164 

Art.  5.  Fifty  years        .        .        . 164 

Art.  6.  Ninety-nine  years 164 

Art.  7.  One  hundred  years 164 

TITLE  C.    LIMITATIONS  ON  CORPORATE  INDEBTEDNESS    .        .    165 
Art.  1.  The  corporate  debts  shall  not  exceed  the  amount  of  the 

capital  stock 165 

Art.  2.  The  corporate  debts  shall  not  exceed  two-thirds  of  the 

amount  of  the  capital  stock 166 

Art.  3.  The  corporate  debts  shall  not  exceed  one-half  the  value 

of  the  corporate  property 166 

Art.  4.  The  bonded  debt  shall  not  exceed  ten  times  the  amount 

of  the  capital  stock 166 

Chapter  II. 

THE  CAPITAL  STOCK. 

TITLE  A.    THE  LIMITATIONS  ON  THE  AMOUNT  OF  THE  AU- 
THORIZED CAPITAL  STOCK 167 

Art.  1.  The  statutory  minimum  .......     167 

Art.  2.  The  statutory  maximum          ......     169 

TITLE  B.    PRELIMINARY    SUBSCRIPTIONS    AND    PAYMENTS    OF 

CAPITAL  STOCK 171 

Art.  1.  A  certain  proportion  of  the  total  capital  stock  must  be 

subscribed  before  beginning  business  .  .  .171 
Sec.  a.  The  minimum  capital  stock  named  in  the  charter  .  171 
Sec.  b.  One  thousand  dollars  .......  171 


Table  of  Contents.  139 

PAGE 

Sec.  c.  Ten  per  cent. 172 

Sec.  d.  Fifty  per  cent 172 

Sec.  e.  The  full  amount  of  the  capital  stock  ....  172 
Art.  2.  A  certain  proportion  of  the   amount  originally  sub- 
scribed must  be  paid  in  before  beginning  business  ~172 

Sec.  a.  Two  per  cent 172 

Sec.  b.  Ten  per  cent 173 

Sec.  c.  Twenty  per  cent.  ........  173 

Art.  3,  A  certain  proportion  of  the  total  capital  stock  must  be 

paid  in  before  beginning  business     ....  173 

Sec.  a.  Ten  per  cent. 173 

Sec.  b.  Twenty  per  cent 173 

Sec.  c.  Twenty-five  per  cent 174 

Sec.  d.  Fifty  per  cent 174 

Sec.  e.  The  total  capital  stock  must  be  paid  in       ...  174 

TITLE  C.    PREFERRED  STOCK 174 

TITLE  D.    THE  METHOD  OF  PAYING  IN  THE  CAPITAL  STOCK  176 
Art.  1.  Stock  may  be  paid  for  in  property  actually  received 

for  the  use  of  the  corporation 176 

Sec.  a.  In  property  of  a  specified  kind  only  ....  176 

Par.  1.  Lands        .        .        . 176 

Par.  2.  Lands  or  patents 176 

Par.  3.  Mining  claims  ........  176 

Par.  4.  The  manufacturing  establishment  of  a  manufac- 
turing company 177 

Sec.  b.  In  property  generally 177 

Art.  2.  Stock  may  be  paid  for  by  labor  or  services  performed 

for  the  corporation 178 

Art.  3.  Miscellaneous  provisions         ......  178 

TITLE  E.    THE  MEASURE  OF  VALUATION  AT  WHICH  PROPERTY 
OR  SERVICES  SHALL  BE  TAKEN  IN  PAYMENT  OF 

STOCK 179 

Art.  1.  At  the  amount  of  the  value  thereof        ....  179 

Art.  2.  At  the  actual  value 179 

Art.  3.  At  the  true  money  value 180 


140  Digest  of  Corporation  JLatos. 

PAGE 

Art.  4.  At  the  fair  cash  value 180 

Art.  5.  At  the  market  price  .......  180 

Art.  6.  At  the  reasonable  value 180 

Art.  7.  At  the  appraised  value 180 

Art.  8.  At  a  just  valuation  ,  180 

Art.  9.  At  a  valuation  agreed  upon  between  the  corporation 

and  the  subscriber 181 

Art.  10.  At  an  arbitrary  value 181 

Art.  11.  In  the  absence  of  actual  fraud  in  the  transaction,  the 

judgment  of  the  directors  shall  be  conclusive  .  181 
Art.  12.  In  the  absence  of  actual  fraud  in  the  transaction,  the 

valuation  fixed  shall  be  conclusive  ....  181 
Art.  13.  Stock  so  issued  shall  be  full  paid  stock  and  not  liable 

to  any  further  assessment 181 


Chapter  III. 

THE    LIABILITY   OF    STOCKHOLDERS   FOR   DEBTS   OF    THE 

CORPORATION. 
TITLE  A.    UNDER  WHAT  CONDITIONS  STOCKHOLDERS  BECOME 

LIABLE 183 

Art.  1.  The  liability  of  stockholders  is  conditional  upon  the 
insolvency  of  the  corporation,  its  dissolution  leaving 
debts  unpaid,  or  the  return  of  an  unsatisfied  execu- 
tion against  it 184 

Art.  2.  Action  must  be  brought  within  a  limited  period  after 

the  debt  was  contracted 185 

TITLE  B.    THE  EXTENT  OF  THE  LIABILITY        .        .        .        .186 
Art.  1.  Stockholders  are  individually  liable  to  the  extent  of 

the  unpaid  balance  on  their  stock     ....     186 

Sec.  a.  Without  further  liability 186 

Sec.  b.  In  addition  to  other  liabilities     .....     187 
Art.  2.  Stockholders  who  have  not  paid  for  their  stock  in  full 
are  jointly  and  severally  liable  for  all  corporate 
debts  .  188 


Table  of  Contents.  141 


PAGE 

Art.  3.  Stockholders  are  severally  liable  for  an  amount  equal 

to  the  amount  of  their  stock  .  .  .  ,  .  188 

Art.  4.  Stockholders  are  liable  for  such  proportion  of  its  debts 

as  their  stock  bears  to  the  total  capital  stock  .  .  188 

Art.  5.  Stockholders  are  liable  for  an  amount  equal  to  the  sum 
of  the  unpaid  balance  and  the  par  value  of  their 
stock  . 188 

Art.  6.  Stockholders  are  individually  liable  for  the  wages  of 

employees  of  the  corporation 189 

Art,  7.  Stockholders  are  liable  for  any  refund  or  reduction  of 
the  capital  stock  which  impairs  the  security  of 

creditors 190 

Sec.  a.  Stockholders,  in  case  of  refund,  are  jointly  and  sev- 
erally liable  for  all  debts  of  the  corporation    .        .     190 
Sec.  b.  Stockholders  are  jointly  and  severally  liable  for  all 
corporate  debts  to  the  extent  of  the  whole  amount 

refunded 191 

Sec.  c.  Stockholders  are  individually  liable  to  the  extent  of 

the  refund  to  them  respectively        .        .        ,        .191 
Art.  8.  Stockholders  are  individually  liable  for  the  failure  of 
the  corporation  to  comply  with  certain  prescribed 
regulations  in  regard  to  organization  and  publicity     192 
Art.  9.  Stockholders  are  individually  liable  for  any  fraud  or 

misconduct  in  such  capacity 192 

Art.  10.  Stockholders  have  no  statutory  liability       .         .         .     193 
Sec.  a.  The  law  is  silent  in  regard  to  their  liability       .        .     193 
Sec.  b.  They  are  expressly  exempt  from  any  liability  .        .193 
TITLE  C.     THE  LIABILITY  OF  STOCKHOLDERS  AS  AFFECTED 

BY  TRANSFERS  OF  STOCK 191 

Art.  1.  The  liability  of  the  original  subscriber  or  transferor  .  195 
Sec.  a.  The  original  subscriber  alone  is  liable  .  .  .  195 
Sec.  b.  The  original  subscriber  or  transferor  remains  liable 

as  well  as  the  transferee 195 

Sec.  c.  The  original  subscriber  or  transferor  is  secondarily 

liable  upon  default  in  payment  by  the  transferee     196 


142  Digest  of  Corporation  Laws. 

PAGE 

Sec.  d.  The  original  subscriber  or  transferor  remains  liable 
for  the  debts  contracted  during  his  ownership,  or 
within  a  limited  period  thereafter  ....  196 

Sec.  e.  The  original  subscriber  or  transferor  remains  liable 
for  the  debts  contracted  during  his  ownership,  but 
not  for  debts  after  transfer 196 

Sec.  f.  The  liability  of  the  original  subscriber  or  transferor 

ceases  upon  the  transfer  of  his  stock         .        .         .     197 
Art.  2.  The  liability  of  the  transferee  or  holder         .         .         .     197 

Sec.  a.  Though  the  liability  of  the  transferor  is  not  dis- 
charged, the  transferee  becomes  liable  for  all 
debts  contracted  both  before  and  after  transfer  .  197 

Sec.  b.  Upon  transfer,  the  transferee  becomes  liable  for  all 
debts  contracted  both  before  and  after  transfer,  and 
the  transferor  is  discharged  .....  198 

Sec.  c.  The  liability  of  the  transferee  and  holder  is  confined 

to  debts  contracted  after  transfer      ....     199 

Sec.  d.  The  transferee  and  holder  assumes  no  liability          .     199 

Chapter  IV. 

INTERCORPORATE  RELATIONS. 

TITLE  A.  CONSOLIDATION  OF  CORPORATIONS  ....  200 
Art.  1.  Any  two  or  more  corporations  may  consolidate  .  .  201 
Art.  2.  Corporations  organized  for  a  similar  purpose  or  carry- 
ing on  a  similar  business  may  consolidate  .  .  201 
Art.  3.  Mining  corporations  may  consolidate  ....  202 
Art.  4.  Similar  manufacturing  corporations  may  consolidate  .  202 
Art.  5.  Mining  or  manufacturing  corporations  may  consolidate  202 

TITLE  B.    CORPORATE  STOCKHOLDING 202 

Art.  1.  Any  corporation  may  own  the  stock  of  any  other  cor- 
poration       .203 

Art.  2.  Certain  kinds  of  corporations  may  own  the  stock  of 

any  corporation 203 


Table  of  Contents.  143 


PAGE 


Art.  3.  A  corporation  may  own  stock  in  another  corporation 
engaged  in  a  similar  business  or  in  a  business  use- 
ful or  subsidiary  to  the  first  corporation  .  .  .  203 

Sec.  a,  Generally -       ._20S_ 

Sec.  b.  May  own  stock  in  a  railroad  connecting  its  plant  or 

adjacent  thereto 204 

Sec.  c.  A  mining  corporation  may  own  stock  in  a  corpora- 
tion constructing  a  tunnel  to  facilitate  the  working 
of  the  mine 204 

Sec.  d.  Mining,  mechanical  or  manufacturing  corporations 
may  own  stock  in  any  corporation  for  generating 
power  and  light  to  facilitate  their  business  .  .  204 

Sec.  e.  A  corporation  may  own  not  more  than  ten  per  cent. 

of  stock  in  a  gas  company  in  the  same  town    .         ,     204 
TITLE  C.    ANTI-TRUST  PROVISIONS  204 


PABTIL- TAX  LAWS. 


Chapter  V. 

THE    GENERAL   PROPERTY    TAX    ON  RESIDENT  DOMESTIC 
CORPORATIONS. 

PAGB 

TITLE  A.  THE  TAX  ON  CORPORATE  REAL  ESTATE    .   .  207 
TITLE  B.  THE  TAX  ON  THE  SEPARATE  ITEMS  OF  CORPORATE 

PERSONAL  PROPERTY 208 

Art.  1.  Such  tax  is  levied  both  on  the  tangible  and  intangible 

personal  property  of  the  corporation        .        .        .     208 
Sec.  a.  Corporations  so  assessed  pay  no  additional  property 
tax  on  their  capital  stock  and  shareholders  are  ex- 
empt from  any  tax  on  their  shares   ....    208 
Sec.  b.  The  ordinary  tangible  and  intangible  personalty  is 
assessed  to  the  corporation  and  other   intangible 
values  are  assessed  through  the  medium  of  a  stock 
tax  on  the  corporation  itself  or  its  shareholders       .     210 
Sec.  c.  The  intangible  property  so  taxed  expressly  includes 

certain  enumerated  items 211 

Par.  1.  Money  on  hand  or  deposit 211 

Par.  2.  The  gross  amount  and  value  of  credits  .        .        .     212 
Par.  3.  The  net  amount  and  value  of  credits       .        .        .     213 

Par.  4.  Mortgages 214 

Par.  5.  Investments  in  public  bonds  or  bonds  of  private 

corporations 216 

Par.  6.  Investments  in  the  stock  of  other  corporations       .    217 

Par.  7.  Franchises 217 

Art.  2.  The  tangible  personal  property  only  is  assessed  under 
this  form  of  tax.  All  the  intangible  property  and 
values  of  the  corporation  are  assessed  through  the 
medium  of  a  tax  on  the  capital  stock  or  shares  .  218 


Table  of  Contents.  145 


PAGE 


Art.  3,  The  corporate  plant  or  enterprise  is  valued  as  a  whole, 
on  the  basis  of  the  money  and  property  invested,  the 
assessed  value  of  the  real  estate  is  deducted,  and 
the  remainder  is  taxed  in  a  lump  sum  as  the  capital 

of  the  corporation 219 

Art.  4.  Corporations  are  not  separately  taxed  on  their  per- 
sonal property,  but  all  their  tangible  and  intangible 
personalty  is  assessed  by  a  tax  on  the  capital  stock 

or  shares 219 

Art.  5.  The  taxation  of  personal  property  outside  the  state 

owned  by  resident  individuals  or  corporations         .    220 
Sec.  a.  The  personal  property  located  outside  the  state  and 

taxed  there  is  expressly  exempt       ....    220 
Sec.  b.  The  money  invested  in  merchandising  and  manufac- 
turing outside  the  state  and  taxed  there  is  expressly 

exempt 220 

Sec.  c.  The  tangible  personalty  located  in  another  state  and 

taxed  there  is  expressly  exempt        .        .        .        .221 
Sec.  d.  Investments  (including  bonds,  mortgages,  etc.)  taxed 

in  another  state  are  expressly  exempt      .        .        .     221 
Sec.  e.  Property  actually  and  permanently  invested  in  busi- 
ness in  another  state  is  expressly  exempt         .        .     221 
Sec.  f .  The  taxable  property  outside  the  state  is  specified,  and 

by  inference  all  other  is  exempt  ....  221 
Par.  1.  Intangible  property  in  another  state  may  be  taxed  221 
Par.  2.  Property  temporarily  out  of  the  state,  or  sent  out 

of  the  state  for  sale  and  not  sold,  may  be  taxed       .    221 
Sec.  g.  The  tangible  property  located  in  another  state  is  ex- 
empt by  judicial  decision 221 

TITLE  C.    THE  TAX  ON  THE  CORPORATE  PROPERTY  AS  REPRE- 
SENTED BY  THE  CAPITAL  STOCK  OR  SHARES        .    222 

Art.  1.  The  tax  on  corporate  excess 223 

Sec.  a.  The  tax  is  assessed  in  a  lump  sum  directly  to  the 

corporation 224 


146  Digest  of  Corporation  Laws. 


PAGE 


Sec.  b.  The  corporation  is  not  directly  taxed,  but  the  tax  is 

assessed  ratably  to  the  individual  shareholders        .     226 
Par.  1.  The  tax  is  collected  directly  from  the  shareholders     227 
Par.  2.  The  tax  is  collected  from  the  corporation  as  the 
agent  of  its  shareholders,  and  the  tax  so  paid  is  a 

lien  on  the  shares 228 

Art.  2.  The  tax  on  the  total  capital  stock 229 

Sec.  a.  The  tax  is  assessed  in  a  lump  sum  directly  to  the 

corporation 230 

Sec.  b.  The  shares  of  stock  are  assessed  at  their  full  market 

value  to  the  individual  holders 230 

Art.  3.  The  method  of  ascertaining  the  taxable  value  of  the 

capital  stock  or  shares 231 

Sec.  a.  The  value  is  represented  by  the  market  value,  or,  if 
there  is  no  market  value,  by  the  actual  value  of  the 

shares  of  stock 231 

Sec.  b.  The  market  value  of  the  shares  of  stock  is  taken  into 
account,  but  is  not  control  ling.  Other  factors  which 
help  to  determine  the  value  of  the  corporation  prop- 
erty for  the  purposes  of  income  or  sale  are  also  con- 
sidered   232 

Par.  1.  The  gross  earnings  and  income  of  the  corporation 
are  considered  in  fixing  the  value  of  the  capital 

stock .232 

Par.  2.  The  net  earnings,  dividends  and  surplus  profits 

are  considered 232 

Par.  3.  The  moneys,  credits,  stocks  and  bonds  owned  by 
the  corporation  are  not  separately  taxed  as  such,  but 
they  are  considered  in  fixing  the  value  of  the  capi- 
tal stock 233 

Par.  4.  The  amount  of  the  corporate  indebtedness  is  not 
specifically  added  to  or  deducted  from  the  value 
otherwise  ascertained  but  it  is  a  factor  to  be  con- 
sidered in  fixing  the  total  valuation.  .  .  .  233 


Table  of  Contents.  147 


PAGE 

Sec.  c.  The  value  of  the  capital  stock  is  indicated  or  meas- 
ured by  the  rate  of  dividend  and  amount  of  surplus, 
but  the  market  value  of  the  shares  of  stock  is  also 
considered  ........  ,  j?33 

Sec.  d.  In  default  of  other   methods  for  determining   the 
value  of  the  entire  corporate  plant,  the  value  of  the 
use  of  the  property,  and  the  capability  of  use  and 
the  cost  of  duplication  may  be  considered  with  other 
evidence     .........     233 

Art.-  4.  The  deductions  allowed  from  the  value  so  ascertained 
in  order  to  fix  the  taxable  residuum  or  corporate 
excess  ......  ....  233 

Sec.  a.  The  value  of  the  real  estate  separately  taxed  is  de- 

ducted        .........     233 

Sec.  b.  The  value  of  the  personal  property  separately  taxed 

is  deducted          .....        .        .        .234 

Sec.  c.  The  value  of  the  tangible  personal  property  sepa- 

rately taxed  is  deducted     ......     235 

Sec.  d.  The  value  of  the  machinery  of  the  corporation  sep- 

arately taxed  is  deducted  ......     235 

Sec.  e.  The  value  of  the  property  without  the  state  is  de- 

ducted        .........     235 

Par.  1.  The  value  of  all  property  without  the  state  is  de- 

ducted        .........     235 

Par.  2.  The  value  of  the  real  estate  without  the  state  is 

deducted     .........     235 

Sec.  f.  The  amount  of  the  bonded  or  other  indebtedness  is 

deducted     .         .         .         .  ,      .....     236 

Sec.  g.  The  amount  of  the  capital  invested  in  non-taxable 

stocks  or  securities  is  deducted          ....     236 
TITLE  D.    THE  TAX  ox  CORPORATE  BONDS      .        .        .        .237 
Art.  1.  The  taxable  value  of  the  corporate  capital  i-s  repre- 
sented by  the  combined  value  of  the  shares  of  stock 
and  outstanding  bon.ds       ......     238 


148  Digest  of  Corporation  Laws. 


PAGB 


Art.  2.  The  corporation  pays  a  tax  on  the  bonds  held  by  resi- 
dents, as  the  agent  of  such  resident  holders,  and  is 
entitled  to  deduct  the  tax  so  paid  from  the  interest 

accruing  on  the  bonds 239 

TITLE  E.    CERTAIN  CORPORATIONS  AKE  EXEMPT   FROM    THE 

GENERAL  PROPERTY  TAX 239 

Art.  1.  Permanent  exemptions 239 

Sec.  a.  Corporations  not  for  pecuniary  profit         .         .        .  239 

Sec.  b.  Manufacturing  corporations        ....        .  239 

Art,  2.  Temporary  exemptions 240 

Sec.  a.  Mining  corporations 240 

Sec.  b.  Manufacturing  corporations  generally       .         .         .  240 

Sec.  c.  Beet-sugar  manufacturing  corporations      .        .        .  240 

Sec.  d.  Zinc-manufacturing  corporations        ....  241 

Sec.  e.  Woolen-manufacturing  corporations  ....  241 

Sec.  f.  Cotton-manufacturing  corporations    ....  241 

Sec.  g.  Ship-building  corporations          .....  241 

Chapter  VI. 

THE    GENERAL    PROPERTY    TAX    ON    FOREIGN    AND    NON- 
RESIDENT DOMESTIC  CORPORATIONS. 

TITLE  A.  THE  TAX  ON  RESIDENT  FOREIGN  CORPORATIONS  .  242 
Art.  1.  The  tax  on  the  real  estate  of  foreign  corporations  .  244 
Art.  2.  The  tax  on  the  separate  items  of  corporate  personal 

property  within  the  state 245 

Sec.  a.  Corporations  so  assessed  pay  no  additional  property 
tax  on  their  capital  stock,  and  shareholders  are  ex- 
empt from  any  tax  on  their  shares  ....     245 
Sec.  b.  Resident  foreign   corporations   are  taxed  on  their 
property,  and  are  also  directly  taxed  by  a  capital 
•  stock  tax  on  their  corporate  excess  .         .         .         .     250 
Sec.  c.  Resident  foreign  corporations  are  taxed  on  the  full 
amount  of  their  capital  stock,  in  lieu  of  any  tax  on 
the  corporate  property      ......     253 


Table  of  Contents.  149 

PAGE 

d.  Resident  foreign  corporations  are  directly  taxed  on  their 
property  only,  but  the  corporate  excess  is  assessed 
ratably  to  the  individual  shareholders      .         ...     253 
Par.  1.  Such  tax  is  paid  directly  by  the  shareholders         .    -253_ 
Par.  2.  Such  tax  is  collected  from  the  corporation  as  the 
agent  of  its  shareholders,  and  the  tax  so  paid  is  a 

lien  on  the  shares 254 

Sec.  e.  Resident  foreign  corporations  are  directly  assessed 
on  their  property  only,  but  their  shares  of  stock  are 
assessed  at  their  full  value  to  the  individual  holders    254 
Par.  1.  Where  a  similar  method  of  taxation  is  employed 

for  domestic  corporations 254 

Par.  2.  Though  domestic  corporations  are  directly  taxed 
both  for  their  property  and  corporate  excess,  while 
the  individual  shareholders  are  exempt,  foreign 
corporations  are  directly  assessed  on  their  property 
only,  and  the  full  value  of  the  shares  is  assessed  to 

the  individual  holders 254 

TITLE  B.    THE  TAX  ox  NON-RESIDENT  DOMESTIC  AND  FOREIGN 

CORPORATIONS 256 

Art.  1.  Shares  of  stock  in  such  corporations  are  taxed  in  the 

hands  of  resident  holders  ......     256 

Art.  2.  The  shares  of  stock  in  such  corporations  are  exempt 

from  taxation 258 

Sec.  a.  No  provision  is  made  for  the  taxation  of  individual 

shares  of  stock  of  any  kind 258 

Sec.  b.  Shares  of  stock  in  non-resident  corporations  which 

are  taxed  in  another  state  are  exempt       .         .         .     259 
TITLE  C.    RETALIATORY  TAXATION  OF  FOREIGN  CORPORATIONS    260 

Chapter  VII. 

LICENSE  TAXES  ON  DOMESTIC  CORPORATIONS. 

TITLE  A.    THE  CHARTER  FEE 264 

Art.  1.  The  fee  is  a  fixed  sum  independent  of  the  amount  of 
the  capital  stock ^c 


!TY 


150  Digest  of  Corporation  Laws. 

PAGE 

Art.  2.  The  charter  fee  is  a  fixed  percentage  of  the  amount  of 

the  authorized  capital  stock 266 

Art.  3.  The  charter  fee  is  graded  according  to  the  amount  of 

the  authorized  capital  stock 268 

TITLE  B.  THE  ANNUAL  FRANCHISE  TAX  .  .  .  .  .  274 
Art.  1.  The  tax  is  a  fixed  sum  independent  of  the  amount  of 

the  capital  stock 276 

Art.  2.  The  tax  is  a  fixed  percentage  of  the  par  value  of  the 

capital  stock 276 

Art.  3.  The  tax  is  graded  according  to  the  amount  of  the 

capital  stock 276 

Art.  4.  The  tax  is  determined  by  the  dividends  on  the  par  value 

of  the  capital  stock,  and  is  levied  on  the  amount  of 

the  capital  stock  employed  in  the  state  .  .  .  279 

TITLE  C.  THE  OCCUPATION  TAX 279 

Art.  1.  Manufacturing  corporations 281 

Art.  2.  Mercantile  corporations 283 

Chapter  VIII. 

LICENSE  TAXES  ON  FOREIGN  CORPORATIONS. 

TITLE  A.    THE  CHARTER  FEE 291 

Art.  1.  There  is  no  provision  for  the  payment  of  any  charter  fee 
by  foreign  corporations  other  than  a  nominal  clerical 

or  recording  fee 292 

Art  2.  The  fee  is  a  fixed  sum  independent  of  the  amount  of 

the  capital  stock 292 

Sec.  a.  The  fee  is  similar  to  that  paid  by  domestic  corpora- 
tions   292 

Sec.  b.  Though  domestic  corporations  pay  a  fixed  percentage 
of  the  amount  of  the  capital  stock,  or  a  fee  graded 

according  to  such  amount 292 

Art.  3.  The  charter  fee  is  levied  on  the  total  amount  of  the  au- 
thorized capital  stock 293 

Sec.  a.  The  fee  is  a  fixed  percentage  of  such  amount,  and 
the  same  percentage  for  foreign  as  domestic  cor- 
porations    ...  293 


Table  of  Contents.  151 

PAOK 

Sec.  b.  The  fee  is  graded  according  to  the  amount  of  the 

total  capital  stock 293 

Par.  1.  Foreign  corporations  pay  the  same  fee  as  domestic     293 
Par.  2.  Foreign  corporations  pay  a  different  fee  from  do- 
mestic          294 

Art.  4.  The  charter  fee  is  levied  on  the  proportion  of  the  capir 
tal  stock  represented  by  property  owned  and  used, 
and  business  transacted  in  the  state  .....     294 
Sec.  a.  The  fee  is  a  fixed  percentage  on  such  proportionate 

amount 294 

Par.  1.  Foreign  corporations  pay  the  same  fee  as  domestic    294 
Par.  2.  Foreign  corporations  pay  a  larger  fee  than  domestic    294 
Sec.  b.  The  fee  is  graded  according  to  such  proportionate 
amount  of  the  capital  stock  in  the  same  manner  and 
at  the  same  rate  as  for  domestic  corporations          .    294 

TITLE  B.    THE  ANNUAL  FRANCHISE  TAX 295 

Art.  1.  The  tax  is  a  fixed  sum,  independent  of  the  amount  of 

the  capital  stock 295 

Art.  2.  The  tax  is  levied,  on  a  percentage  basis,  upon  the 
amount  of  the  capital  stock  paid  in,  in  cash  or  other- 
wise, and  the  rate  is  lower  than  for  similar  domes- 
tic corporations 295 

Art.  3.  The  tax  is  levied,  on  a  percentage  basis  or  by  a  grad- 
uated scale,  upon  the  total  amount  of  the  authorized 

capital  stock 295 

Sec.  a.  Foreign  corporations  pay  the  same  tax  as  domestic  .     295 
Sec.  b.  Foreign  corporations  pay  a  greater  tax  than  domestic     296 
Art.  4.  The  tax  is  levied,  on  a  percentage  basis  or  by  a  grad- 
uated scale,  on  the  proportion  of  the  authorized 
capital  stock  represented  by  the  property  and  busi- 
ness of  the  corporation  in  the  state,  and  the  rate  is  the 
same  as  for  domestic  corporations    ....    296 
Art.  5.  Domestic  corporations  are  subject  to  a  franchise  tax 

but  foreign  corporations  are  exempt        .        .        .     296 
TITLE  C.    THE  OCCUPATION  TAX  297 


152  Digest  of  Corporation  Laws. 


TABLE  OF  STATE  CITATIONS, 


The  citations  in  this  report  have  in  all  cases  been  made 
from  the  latest  accessible  compilations  of  state  laws.  Not 
all  of  these  are  official,  but  all  are  of  recognized  authority. 
The  period  subsequent  to  their  date  is  covered  by  the  annual 
or  biennial  laws  appended  to  each  in  the  table  below.  This 
table  shows  that  the  compilations  in  some  cases  include  the 
session  laws  of  the  same  date,  and  in  other  cases  do  not. 
Where  the  regular  session  laws  are  published  biennially, 
special  session  laws  are  occasionally  published  during  the  off 
years.  These  have  all  been  consulted,  though  specific  men- 
tion is  made,  in  the  table  below,  of  the  special  session  laws 
of  1902  only.  With  the  exception  of  the  states  of  Georgia, 
Rhode  Island  and  Vermont,  where  the  laws  of  the  current 
year  have  not  yet  appeared,  this  report  covers  all  legislation 
throughout  the  states  and  territories  down  to  and  through 
the  year  1902. 

The  compilations  are  cited  by  section  numbers  only,  where 
these  are  consecutive  throughout.  Otherwise,  by  chapter 
and  section  numbers.  The  annual  or  biennial  laws  have 
been  uniformly  cited  by  the  abbreviation  L.,  though  in  some 
states  they  are  termed  acts  or  statutes.  If  the  special  laws 
of  any  state  are  published  in  a  separate  volume,  the  citations 
are  to  be  understood  to  refer  to  the  general  or  public  laws 
of  the  given  date.  The  annual  or  biennial  laws  are  cited  by 
the  year  and  chapter  numbers,  except  in  a  few  states  where 
the  numbering  of  the  chapters  is  not  consecutive,  and  page 
references  have  been  necessary.  In  order  to  avoid  any  con- 
fusion on  this  account,  abbreviations  for  chapter  or  page  have 
been  used  in  the  citations  throughout. 

Alabama,  Code  1896;  Biennial  Acts  1897-1901. 

Arizona,  Ee vised  Statutes  1901. 

Arkansas,  Sandels  and  Hill's  Digest  of  the  Statutes 

of  Arkansas  1894 ;  Biennial  Acts 

1895-1901. 


Table  of  State  Citations.  153 

California,  Deering's  Annotated  Codes  and  Statutes 

1885,  Supplement  1889  ;  Biennial 

Statutes  and  Amendments  1891— 

1901. 
Colorado,  Mills's  Annotated  Statutes  1891 ;  Biennial 

Session  Laws  1891-1901  ;  Special" 

Session  1902. 

Connecticut,  General  Statutes,  Revision  of  1902. 
Delaware,    Revised    Statutes    1893 ;    Biennial   Laws 

1895-1901  (Volumes  20-22). 
District  of   Columbia,   Code    1902;    U.   S.   Statutes 

1902. 
Florida,    Revised    Statutes     1892 ;     Biennial     Acts 

1893-1901. 

Georgia,  Code  1895  ;  Annual  Laws  1896-1901. 
Idaho,  Codes  Annotated  1901. 
Illinois,  Kurd's  Revised  Statutes  1901. 
Indiana,  Burns's   Annotated   Statutes,   Revision   of 

1901. 

Indian  Territory,  Statutes  1899. 
Iowa,  Code  Annotated  1897  ;   Biennial  Laws  1898- 

1902. 

Kansas,  Dassler's  General  Statutes  1901. 
Kentucky,    Carroll's    Statutes    1899 ;    Biennial    Acts 

1900,  1902. 
Louisiana,    Wolff's   Revised   Laws    1897 ;    Biennial 

Acts  1898-1902. 
Maine,  Revised  Statutes  1883  ;  Biennial  Laws  1885- 

1901. 
Maryland,  Public  General  Laws  1888,   Supplement 

1898  ;  Biennial  Laws  1900,  1902. 
Massachusetts,   Revised  Laws    1902 ;     Annual  Acts 

1902. 
Michigan,  Compiled  Laws  1897  ;  Biennial  Public  Acts 

1899,  1901. 
Minnesota,    Statutes   1894 ;    Biennial  General  Laws 

1895-1901 ;  Special  Session  1902. 
Mississippi,  Thompson,  Dillard  and  Campbell's  An- 
notated Code  1892  ;  Biennial  Laws 

1894-1902. 


154  Digest  of  Corporation  Laws. 

Missouri,    Revised  Statutes    1899 ;     Biennial    Laws 

1901. 
Montana ,    Codes   Annotated   1895  ;     Biennial  Laws 

1897-1901. 

Nebraska,  Compiled  Statutes  1901. 
Nevada,  Cutting's  Compiled  Laws  1861-1900  ;    Stat- 
utes 1901. 
New    Hampshire,    Public    Statutes    1901  ;     Biennial 

Laws  1901. 
New    Jersey,    General   Laws    (arranged  by   topics) 

1895  ;   Annual  Laws  1896-1902. 
New  Mexico,  Compiled  Laws  1897  ;    Biennial  Laws 

1899,  1901. 
Neiv  York,  Heydecker's  General  Laws  and  Eevised 

Statutes     1901 ;      Annual     Laws 

1902. 
North   Carolina,   Code  1883  ;  Biennial  Laws   1885- 

1891 ;  Biennial  Public  Laws  1893- 

1901. 
North  Dakota,  Revised  Codes  1895  ;    Biennial  Laws 

1897-1901. 
Ohio,    Bates'    Annotated    Statutes    1898 ;    Biennial 

Laws  1900,  1902. 
Oklahoma,    Statutes  1893  ;    Biennial  Session  Laws 

1895-1901. 
Oregon,  Hill's  Annotated  Laws  1892  ;  Biennial  Laws 

1893-1899 ;       Biennial      General 

Laws  1901. 
Pennsylvania,  Pepper  and  Lewis's  Digest  of  the  Laws 

of    Pennsylvania     (arranged    by 

topics)     1895 ;      Biennial      Laws 

1895-1901. 
Rhode   Island,    General  Laws  1896  ;  Annual  Laws 

1896-1901. 

South  Carolina,  Code  1902;  Annual  Acts  1902. 
South  Dakota,  Grantham's  Annotated  Statutes  1901 ; 

Session  Laws  1901. 

Tennessee,  Code  1896  ;  Biennial  Acts  1897-1901. 
Texas ,  Revised  Statutes  1895  ;  Biennial  General  Laws 

1897-1901. 


Table  of  State  Citations.  155 

Utah,  Revised  Statutes  1898;  Biennial  Laws  1899, 
1901. 

Vermont,  Statutes  1894;  Biennial  Laws  1896-1900. 

Virginia,  Code  1887,  Supplement  1898 ;  Biennial 
Acts  1900,  1902. 

Washington,  Ballinger's  Annotated  Codes  and  Stat- 
utes 1897  ;  Biennial  Laws  1899, 
1901. 

West  Virginia,  Code,  Warth's  Fourth  Edition,  1899; 
Biennial  Acts  1901. 

Wisconsin,  Statutes,  Sanborn  and  Berryman's  Anno- 
tations, 1898 ;  Biennial  Laws 
1899,  1901. 

Wyoming,  Revised  Statutes  1899  ;  Biennial  Laws 
1901. 


PAET  I, -MISCELLANEOUS  LAWS. 


CHAPTER  I. 


GENEEAL  KESTKICTIONS. 

TITLE    A.     FOR    WHAT    PURPOSES    CORPORATIONS 
MAY    BE    CREATED. 

ART.  1.  THE  AUTHORIZED  PURPOSES  ARE  BROADLY  DEFINED 
SO  AS  TO  INCLUDE  PRACTICALLY  ALL  LEGITIMATE  ENTER- 
PRISES. 

In  many  of  the  states  express  mention  is  also  made  of 
various  specific  purposes  for  which  corporations  may  be 
organized,  but,  as  all  such  purposes  are  covered  by  the 
general  definition,  they  need  not  be  separately  enumerated. 
Each  corporation  is,  however,  generally  required  to  set  out 
in  its  charter  the  specific  purpose  (or  purposes  if  more  than 
one  is  authorized)  for  which  it  is  organized,  and,  in  the 
absence  of  an  amendment  to  its  charter,  is  restricted  to  the 
transaction  of  the  business  specified. 

Banking,  insurance,  and  various  kinds  of  public  service 
corporations  are  usually  governed  by  special  statutes  and 
expressly  excepted  in  the  provisions  of  the  general  law. 
These  exceptions  have  not  been  recorded,  as  this  report  is 
restricted  to  ordinary  business  corporations,  and  aims  to 
state  the  existing  law  with  reference  to  such  corporations 
only.  In  order  to  avoid  misconception,  this  limitation 
must  be  kept  constantly  in  view. 


Delaware,  L.  1901,  Ch.  167,  §  1. 
Kentucky,  Stat.,  §  538. 


158  Digest  of  Corporation  Laws. 


Sec.  a.    For  any  purpose  or  purposes  whatsoever,  or  two  or 
more  combined. 

South  Carolina,  Code,  §  1880. 


Sec,  b.    For  any  lawful  purpose. 

Colorado,  Stat.,  §  472. 

(For  the  trans- 
action of  any 
lawful  business, 
or  to  promote 
or  conduct  any 
legitimate  ob- 
j  ect  or  pur- 
pose.) 

Illinois,  Stat.,  Ch.  32,  §  1. 
Mississippi,  Code,  §  832. 

New  Jersey,  L.  1896,  Ch.  185,   §   6 ;  L.   1899,  Ch. 
176.       (For    any   lawful    purpose    or 
purposes  whatever.) 
New   York,  G.  L.,  Ch.  41,  §   2.      (For  any  lawful 

business  purpose  or  purposes.) 

Wisconsin,  Stat.,  §  1771.      (For  any  lawful  business 
or  purpose  whatever.) 

Sec.  c.    For  any   purpose  for  which  individuals  may  law- 
fully associate  themselves. 

California,  Civ.  Code,  §  286. 
Idaho,  Code,  §  2087. 
North  Dakota,  Civ.  Code,  §  2856. 
Ohio,  Ann.  Stat.,  §  3235  ;  L.  1902,  p.  622.      (Except 
for  carrying  on  a  professional  business.) 
Utah,  R.  S.,  §  314;  L.  1899,  Ch.  52. 


Sec.  d.  For  any  purpose  or  business  useful  to  the  public 
for  which  a  firm  or  copartnership  may  be  lawfully 
formed. 

West  Virginia,  Code,  Ch.  54,  §  2,  1"  10. 


Corporate  Purposes.  159 

Sec.  e.    For  the  transaction  of  any  lawful  business. 

Alabama,  Civ.  Code,  §  1251.  (For  any  industrial 
business  or  lawful  enterprise.) 

Arizona,  R.  S.,  §  764. 

Arkansas,  Stat.,  §  1326. 

Connecticut,  G.  S.,  §  3358. 

District  of  Columbia,  Code,  §  605.  (Any  enterprise 
or  business  which  may  be  lawfully 
conducted  by  an  individual.) 

Florida,  R.  S.,  §  2122. 

Iowa,  Code,  §  1607. 

Louisiana,  L.  1880,  Ch.  125,  as  amended,  L.  1902, 
Ch.  154;  L.  1888,  Ch.  36.  (Except 
stockjobbing.) 

Maine,  R.  S.,  Ch.  48,  §  16. 

Massachusetts,  R.  L.,  Ch.  110,  §  13.  (Except  dis- 
tilling or  manufacturing  intoxicating 
liquors.) 

Michigan,  Comp.  L.,  §  7037  ;  L.  1901,  Ch.  154  §  1. 
(Both  a  manufacturing  and  a  mercantile 
business  may  be  carried  on  by  the  same 
corporation.) 

Minnesota,  Stat.,  §  2794. 

Nebraska,  Comp.  Stat.,  §  1826. 

Nevada,  Comp.  L.,  §  866.  (Any  species  of  trade, 
business  or  commerce,  foreign  or  do- 
mestic.) 

New  Hampshire,  P.  S.,  Ch.  147,  §  1. 

North  Carolina,  L.  1901,  Ch.  2,  §  8.  (For  engaging 
in  any  business  not  unlawful.) 

Oregon,  Ann.  L.,  §  3217.  (For  the  purpose  of 
engaging  in  any  lawful  enterprise, 
business,  pursuit  or  occupation.) 

Pennsylvania,  L.  1901,  p.  624.  (But  for  not  more 
than  one  kind  of  business,  and  the 
same  must  be  set  forth  in  the  charter.) 

Soufli  Dakota,  Ann.  Stat.,  §  3812. 

Vermont,  Stat. ,  §  3704.  (For  carrying  on  any  object 
or  business  not  repugnant  to  public 
policy  or  the  laws  of  the  state.) 


160  Digest  of  Corporation  Laws. 

Virginia,  Code,  §  1145;  L.  1902,  Ch.  651.  (Any 
business  which  may  be  lawfully  con- 
ducted by  an  individual  or  by  a  body 
politic  or  corporate.) 

Washington,  Code,  §  4250.  (Any  species  of  trade 
or  business.) 

See.  f.    To  constitute  an  ordinary  business  corporation. 
Rhode  Island,  G.  L.,  Ch.  176,  §  2. 

Sec.  g.    For  any  purpose  intended  for  pecuniary  profit. 

Georgia,  Code,   §§   1831,  1834.      (For  purposes  of 

individual  profit.) 
Missouri,  K.  S.,  §  1319.      (Profit  or  gain.) 

ART.  2.    INCORPORATION  IS  AUTHORIZED  FOR  CERTAIN  SPECIFIC 
PURPOSES  ONLY. 

Instead  of  including  all  ordinary  business  corporations  in 
a  general  law  the  following  states  divide  these  corporations 
as  well  as  other  corporations  into  various  classes,  with  a 
greater  or  less  degree  of  particularity,  and  usually  provide  a 
special  statute  for  the  regulation  of  each.  Thus  in  Indiana 
special  provision  is  made  for  over  fifty,  and  in  Tennessee 
and  Texas  for  about  sixty  different  kinds  of  corporations. 
This  tendency  to  elaborate  subdivision  is  shown  in  its 
extreme  form  in  Tennessee,  where  a  separate  form  of  charter 
is  prescribed  for  each  of  the  sixty  kinds  of  corporations. 
The  various  classes  of  corporations  taken  in  the  aggregate 
will  usually  be  found  to  cover  all  the  business  purposes  for 
which  corporations  are  commonly  organized,  but  at  the  same 
time  to  exclude  various  special  forms  of  business  enterprise. 
It  is  only  by  some  broad  form  of  definition  that  the  law  can 
adapt  itself  to  the  ever-changing  industrial  conditions  of  a 
highly  organized  community. 

As  it  would  involve  too  much  detail  to  enumerate  all  the 
purposes  for  which  corporations  may  be  organized  in  these 
various  states,  only  the  provisions  applicable  to  the  usual 
kinds  of  business  corporations  are  here  given. 


Corporate  Purposes.  161 

Sec.  a.    For  the  transaction  of  any  kind  of  manufacturing, 
mining,  mechanical,  chemical  or  mercantile  business. 

Indiana,1  Ann.  Stat.,  §§  5051,  45955;  L.  1901, 
Ch.  127,  §  15.  (Atso  grain-elevator, 
union  stock  yard  and  transit  com- 
panies.) 

Kansas,  G.  S.,  §  1250.  (Mercantile  and  agricul- 
tural implements  and  produce  business, 
either  separately  or  all  combined.) 

Maryland,  P.  G.  L.,  Art.  23,  §§  19,  20;  L.  1894, 
Ch.  599.  (Also  for  shipbuilding  and 
industrial  purposes,  and  for  the  sale 
and  transportation  of  the  products  of 
any  manufacturing  or  mining  corpora- 
tion. Mercantile  corporations  are  de- 
fined as  corporations  "  for  conducting 
or  carrying  on  in  this  state  and  else- 
where any  lawful  wholesale  or  retail 
trading,  commercial  or  mercantile 
business,  where  the  principal  office  and 
place  of  business  of  the  corporation  are 
located  in  this  state.") 

Montana,  Civ.  Code,  §  393,  f  25,  §  411.  (Or  for 
any  commercial  or  industrial  business, 
or  of  carrying  on  any  other  branch  of 
business  designed  to  aid  in  the  indus- 
trial or  productive  interests  of  the 
country.) 

Wyoming,  K.  S.,  §  3029.  (Or  any  business  de- 
signed to  aid  in  the  industrial  or 
productive  interests  of  the  country.) 

•  '  Corporations  may  be  created  for  the  sale  in  connection  with  the 
manufacture  of  dry  goods,  fancy  goods,  boots  and  shoes,  and  jewelry, 
but  for  the  purpose  of  buying  and  selling  merchandise  and  conducting 
mercantile  operations,  voluntary  associations  only  are  authorized.  Such 
associations  are  held  to  be  corporations  with  ordinary  corporate  powers 
and  divisible  and  transferable  share  capital,  but  there  is  no  provision 
for  the  limitation  of  the  stockholders  liability.  Ibid.,  §§  4583, 4595,  n-z. 


162  Digest  of  Corporation  Laws.* 

Sec.  b.    Mining,  manufacturing  or  other  industrial  pursuits. 

New  Mexico,  Coinp.  L.,  §  411. 
Oklahoma,  Stat.,  §  930. 

Sec.  c.    For  the  trade  of  merchants,  and  for  mining,  boring, 
manufacturing  and  other  specified  purposes. 

Tennessee,  Code,  §§  2330,  2447.  (See  also  Code, 
§§  2054,  2077-2512;  L.  1899,  Chs.  17, 
300;  L.  1901,  Chs.  125,  138,  167.) 

Sec.  d.  For  manufacturing  or  mining  and  the  purchase  and 
sale  of  goods,  wares  and  merchandise  used  for  such  busi- 
ness. Also  for  buying  and  selling  goods,  wares  and 
merchandise  by  wholesale,  or  wholesale  and  retail ;  and 
for  other  specified  purposes. 

Texas,  K.  S.,  Art.  642,  HI  14,  24;  L.  1899,  Ch. 
43;  L.  1901,  Ch.  43. 

TITLE  B.     LIMITATIONS  ON  CORPORATE  EXISTENCE. 

While  the  quality  of  continuous  succession  is  inherent  in 
the  nature  of  a  corporation,  the  quality  of  perpetual  suc- 
cession or  immortality  is  not  a  necessary  attribute.  In 
almost  half  the  states  the  duration  of  corporate  existence 
is  limited  to  a  prescribed  term.  In  some  of  these  states, 
however,  the  existence  of  the  corporation  may  be  renewed 
or  extended  by  vote  of  the  stockholders  for  another  like 
period.  Ordinarily  a  corporation  may  also,  by  its  charter, 
limit  its  duration  to  any  period  it  may  desire  within  the 
limit  fixed  by  law. 

In  addition  to  the  general  restrictions  on  corporate  dura- 
tion, enumerated  below,  many  states  require  a  corporation 
to  begin  business  within  a  limited  period,  usually  two  years, 
after  incorporation,  on  penalty  of  forfeiting  its  charter. 
There  is  also  a  common  provision  that  a  corporation,  after 
its  charter  has  expired  by  limitation  or  otherwise,  may 
continue  its  existence  for  a  limited  period,  usually  three 
years,  in  order  to  prosecute  and  defend  legal  actions,  to 
realize  on  its  assets,  and  to  distribute  the  net  proceeds 
among  its  stockholders. 


Limitations  on  Corporate  Existence.         163 

ART.  1.     TWENTY  YEARS. 

Alabama,  Civ.  Code,  §§  1256,  1260.  (Except  min- 
ing and  manufacturing  corporations. 
Renewal  by  majority  vote.) 

Colorado,  Ann.  Stat.,  §  473;  L.  1899,  p.  163. 
(Renewal  for  like  term  by  majority 
vote.) 

Georgia,  Code,  §  2350;  L.  1897,  p.  28.  (Renewal, 
authorized  by  proper  corporate  action, 
granted  on  application  to  Superior 
Court.) 

Iowa,  Code,  §  1618;  L.  1900,  Ch.  56.  (Renewal 
for  like  period  by  majority  vote,  and 
purchase  of  stock  of  dissenting  stock- 
holders at  its  real  value.) 

Montana,  Civ.  Code,  §§  403,  412,  413.  (Renewal 
for  not  more  than  one  additional  term 
of  twenty  years,  by  vote  of  two-thirds 
of  all  the  shares  of  stock.) 

North  Dakota,  Code,  §§  2882,  3259.  (Renewal  by 
vote  or  written  request  of  majority  in 
number  or  amount  of  stockholders.) 

South  Dakota,  Constit.,  Art.  17,  §  9;  Ann  Stat., 
§  4208.  (Corporations  for  mining, 
manufacturing  or  other  industrial  pur- 
suits. Renewal  only  by  special  act.) 

ART.  2.     TWENTY-FIVE  YEARS. 

Arizona,  R.  S.,  §  771.  (Renewal  from  time  to 
time  for  like  term  by  three-fourths 
vote.) 

ART.  3.     THIRTY  YEARS. 

Michigan,  Comp.  L.,  §§   6989,   6992,    7038,    7069. 

(Renewal  by  two-thirds  vote.) 
Minnesota,    L.   1897,  Ch.   12;    L.    1901,  Ch.   207. 

(Renewal  by  two-thirds  vote.) 


104  Digest  of  Corporation  Laws. 

Virginia,  Code,  §  1143.  (Manufacturing  or  min- 
ing corporations  only.  Apparently 
renewal  by  special  act  only.) 

ART.  4.    FORTY  YEARS. 

Maryland,  P.  Gr.  L.,  Art.  23,  §  42. 

ART.  5.     FIFTY  YEARS. 

California,  Civ.  Code,  §§  290,  401.  (Renewal  for 
like  period  by  vote  or  written  assent 
of  two-thirds  in  number  or  amount  of 
stockholders.) 

Idaho,  Civ.  Code,  §  2089. 

Indiana,  Ann.  Stat.,  §  5051.  (Manufacturing, 
mining  or  mechanical  corporations.) 

Mississippi,  Code,  §§  833,  834,  836.  (A  corporation 
organized  for  a  less  period  may  en- 
large its  term  to  fifty  years  by  consent 
of  the  governor  and  attorney-general, 
but  no  corporation  shall  exist  for  more 
than  fifty  years.) 

Missouri,  R.  S.,  §   1312. 

Nevada,  Comp.  L.,  §  867. 

New  Mexico,  Comp.  L.,  §  415. 

New  York,  G.  L.,  Ch.  41,  §  8.  (Consolidated  cor- 
porations only.) 

Washington,  Constit.,  Art.  12,   §   3 ;  Code,  §  4251. 
(Existing  charters  not  to  be  extended.) 
West  Virginia,  Code,  Ch.   54,   §    11 ;  L.   1901,  Ch. 
35.      (Renewal  for  like  period  by  pub- 
lication and  majority  vote.) 

ART.  6.    NINETY-NINE  YEARS. 

Illinois,  R.  S.,  Ch.  32,  §  2. 

ART.  7.    ONE  HUNDRED  YEARS. 

Utah,  L.  1901,  Ch.  81.  (Also  not  less  than  three 
years.) 


Corporate  Indebtedness.  165 


TITLE  C.     LIMITATIONS  ON  CORPORATE  INDEBTED- 
NESS. 

The  rule  prevailing  in  more  than  half  the  states  is  that 
corporations  may  contract  debts,  just  as  individuals,  to-4he 
full  limit  of  their  financial  credit.  But  in  the  states  named 
below  the  limit  of  indebtedness  is  fixed  by  statute.  Where 
a  corporation  exceeds  the  prescribed  limit,  its  contracts  are 
not  void,  but  the  assenting  directors  are  usually  made  per- 
sonally liable  for  all  unauthorized  debts. 


ART.  1.  THE  CORPORATE  DEBTS  SHALL  NOT  EXCEED  THE  AMOUNT 
OF  THE  CAPITAL  STOCK. 

This  is  the  usual  rule  where  any  restriction  is  imposed. 
Its  explanation  is  found  in  the  fact  that  the  capital  stock  is 
the  fund  which  creditors  must  look  to  for  the  satisfaction  of 
their  debts. 

Alabama,  Civ.  Code,  §  1256,  1[  7.  (Restriction  on 
power  to  borrow  money.) 

California,  Civ.  Code,  §  309;  L.  1891,  Ch.  247. 
(The  subscribed  capital  stock.) 

Illinois,  R.  S.,  Ch.  32,  §  16.  (Assenting  directors 
liable  for  excess.) 

Kansas,  G.  S.,  §  1274.  (The  authorized  capital 
stock.  Restriction  on  bonded  debt.) 

Massachusetts,  R.  L.,  Ch.  110,  §  58.  (If  in  excess 
of  its  capital,  all  directors  are  liable.) 

Mississippi,  Code,  §  853.  (In  case  of  manufactur- 
ing and  trading  corporations.  If  in 
excess  of  paid-in  capital  stock,  direc- 
tors contracting  debt  are  liable.) 

Missouri,  R.  S.,  §  962.  (The  authorized  capital 
stock.) 

Nevada,  Comp.  L.,  §  979.  (The  capital  stock  actu- 
ally paid  in.) 

New  Mexico,  Comp.  L.,  §  429.  (Assenting  direc- 
tors liable.) 


166  Digest  of  Corporation  Laws. 

North  Dakota,  Civ.  Code,  §§  2891,  2892.  (The 
subscribed  capital  stock.  Assenting 
directors  liable.) 

Ohio,  L.  1902,  pp.  151,  390.  (Restriction  on  the 
bonded  debt.) 

Oklahoma,  Stat.,  §  958.  (The  subscribed  capital 
stock.  Assenting  directors  liable.) 

Rhode  Island,  R.  L.,  Ch.  180,  §  15.  (The  paid-in 
capital  stock.  Manufacturing  corpora- 
tions.) 

South  Dakota,  Code,  §  384.  (The  subscribed  capi- 
tal stock.  Assenting  directors  liable.) 

Tennessee,  Code,  §  2337.  (The  paid-in  capital  stock. 
Applies  to  manufacturing  and  mining 
corporations.  Assenting  directors  lia- 
ble.) 

Texas,  R.  S.,  Art.  653.  (The  authorized  capital 
stock.) 

Wyoming,  R.  S.,  §  3049.  (Assenting  directors 
liable.) 

ART.  2.    THE  CORPORATE  DEBTS  SHALL  NOT  EXCEED  TWO-THIRDS 
OF  THE  AMOUNT  OF  THE  CAPITAL  STOCK. 

Arizona,  R.  S.,  §  767.  (The  highest  amount  of 
indebtedness  or  liability,  direct  or  con- 
tingent.) 

Iowa,  Code,  §  1611. 

Vermont,  Stat.,  §  3724.  (Two-thirds  of  the  paid-in 
capital  stock.  Assenting  directors  lia- 
ble.) 

ART.  3.  THE  CORPORATE  DEBTS  SHALL  NOT  EXCEED  ONE-HALF 
THE  VALUE  OF  THE  CORPORATE  PROPERTY. 

New  Hampshire,  P.  S.,  Ch.  150,  §  4. 


ART.  4.    THE  BONDED  DEBT  SHALL  NOT  EXCEED   TEN  TIMES  THE 
AMOUNT  OF  THE  CAPITAL  STOCK. 

Washington,  Code,  §  4266. 


The  Minimum  Capital  Stock.  167 


CHAPTER  II. 

THE  CAPITAL  STOCK, 


TITLE   A.     THE    LIMITATIONS  ON  THE   AMOUNT    OP 
THE  AUTHORIZED   CAPITAL  STOCK. 

The  amount  of  the  authorized  capital  stock  must  be  fixed 
by  the  articles  of  incorporation,  and  may  be  any  sum  within 
the  minimum  and  maximum  limitations  prescribed  by  statute. 
Subject  to  prescribed  regulations  for  securing  the  rights  of 
creditors,  and  other  special  provisions,  the  original  capital 
stock  may  be  subsequently  increased  or  decreased  to  any 
amount  within  the  statutory  limits,  by  a  vote  of  the  stock- 
holders, passed  at  a  special  meeting,  and  representing  a 
majority,  or  some  larger  proportion,  usually  two-thirds,  of 
the  capital  stock. 

ART.  1.    THE  STATUTORY    MINIMUM. 

In  all  states  except  those  mentioned  below  there  is  no 
limitation  upon  the  minimum  amount  of  the  authorized 
capital  stock. 

Sec.  a.    Five  hundred  dollars  ($500). 

New  York,  G.  L.,  Ch.  41,   §   1.      (Capital  of  this 

amount  required  to  begin  business.) 
Vermont,  Stat.,  §  3728. 
Virginia,  Code,  §  1148;  L.  1890,  p.  56. 

Sec.  b.    One  thousand  dollars  ($1,000). 

Maine,  R.  S.,  Ch.  48,  §  17  ;  L.  1901,  Ch.  229,  §  8. 

Massachusetts,  E.  L.,  Ch.  110,  §§  7,  13.  (Corpora- 
tions for  co-operative  trade  or  for  any 
lawful  business  not  mentioned  in  sec- 
tions d  and  g,  below.) 


168  Digest  of  Corporation  Laws. 

Michigan,  Comp.  L.,  §  7038;  L.  1901,  Ch.  154, 
§  3.  (Corporations  for  manufacturing 
products  of  milk.  Also  business  cor- 
porations except  manufacturing  and 
mercantile.) 

New  Hampshire,  P.  S.,  Ch.  147,  §  6. 

Sec.  c.    Two  thousand  dollars  ($2,000). 

Connecticut,  G.  L.,  §  3359. 
Delaware,  L.  1901,  Ch.  167,  §  5. 
Missouri,  K.  S.,  §  1320. 

New  Jersey,  L.  1896,  Ch.   185,  §  8 ;  L.   1898,  Ch. 
v 172/§  2. 

Sec.  d.    Five  thousand  dollars  ($5,OOO). 

Louisiana,  L.  1882,  Ch.  Ill;  L.  1888,  Ch.  36. 

Massachusetts,  R.  L.,  Ch.  110,  §§  5,  6,  9,  10,  11. 
(Mechanical,  manufacturing,  mining, 
printing,  agricultural,  ice,  quarrying, 
light,  heat,  power  transportation  or 
hotel  corporations.) 

Michigan,  Comp.  L.,  §  7038.  (Manufacturing  or 
mercantile  corporations,  except  cor- 
porations for  manufacturing  products 
of  milk.) 

Sec.  e.    Ten  thousand  dollars  ($10,000). 

Michigan,    Comp.  L.,    §    6994.      (Mining   corpora- 
tions.) 
Minnesota,  Stat.,  §  2797;  L.  1901,  Ch.  347. 

Sec.  f.    Twenty  thousand  dollars  ($20,000). 

Texas,  E.  S.,  Art.  642,  f  2;5.  (Wholesale  trading 
corporations.) 

Sec.  g.    One  hundred  thousand  dollars  ($100,000) . 

Massachusetts,  R.  L.,  Ch.  110,  §  12.  (Swine- 
slaughtering  and  pork-packing  corpora- 
tions.) 


The  Maximum  Capital  Stock.  169 

ART.  2.     THE   STATUTORY  MAXIMUM. 
Sec.  a.     One  hundred  thousand  dollars  ($10O,OOO). 

Massachusetts,  R.  L.,  Ch.  110,  §  7.  (Corporations 
for  the  purpose  of  co-operative  trade.  J~ 

Sec.  b.    Two  hundred  and  fifty  thousand  dollars  ($25O,OOO). 

Mississippi**,  Code,  §  838.  (Except  manufacturing 
corporations.) 

Sec.  c.    Five  hundred  thousand  dollars  ($5OO,000). 

Massachusetts,  R.  L.,  Ch.  110,  §§  6,  9,  11.  (Print- 
ing, publishing,  agricultural,  ice, 
quarrying,  light,  heat,  power,  hotel, 
swine-slaughtering  and  pork-packing 
corporations.) 

Sec.  d.     One  million  dollars  ($1,OOO,OOO). 

Louisiana,  L.  1888,  Ch.  111.      (Mechanical,  mining 

^  or   manufacturing   corporations.     But 

may  subsequently  increase  stock  to  any 

amount.  "  Constit.    (1898),  Art.  267; 

L.  1898,  Ch.  149.) 

Massachusetts,  R.  L.,  Ch.  110,  §§  5,  13.  (Mining, 
transportation,  and  all  other  corpora- 
tions except  those  mentioned  in  sec- 
tions a  and  c,  above,  and  except 
mechanical  and  manufacturing  corpora- 
tions, whose  maximum  capital  stock  is 
unlimited.) 

Mississippi?  Code,  §  838.  (Manufacturing  corpora- 
tions.) 

New  Hampshire,  P.  S.,  Ch.  147,  §  6. 

2  The  limitation  by  the  terms  of  the  statute  applies  to  the  real  and 
personal  property  that  may  be  owned  by  the  corporation.  Such  a  pro- 
vision would  seem  to  impose  by  implication  a  similar  limitation  on  the 
amount  of  the  authorized  capital  stock. 


170  Digest  of  Corporation  Laws. 

Pennsylvania,  Dig.  L.,  Corporations,  §  38 ;  L.  1899, 
p.  190,  §  2.  (Except  mechanical, 
mining,  quarrying  or  manufacturing 
corporations.  But  the  stock  may  be 
subsequently  increased  to  any  amount. ) 

Vermont,  Stat.,  §  3728. 

Sec.  e.    Two  million  five  hundred  thousand  dollars  ($2,500, 

000). 

Michigan,  Comp.  L.,  §  6994.  (Mining  corpora- 
tions.) 

Sec.  f.    Five  million  dollars  ($5,OOO,OOO). 

Michigan,  Comp.  L.,  §  7038.  (Manufacturing  or 
mercantile  corporations.)' 

Pennsylvania,  Dig.  L.,  Manufacturing  Companies, 
§  1  TL.  1899,  p.  190,  §  2.  (Mechan- 
ical, mining,  quarrying  or  manufactur- 
ing corporations,  except  for  brewing 
or  distilling  liquor.  But  the  stock 
may  be  subsequently  increased  to  any 
amount.) 

Sec.  g.    Ten  million  dollars  ($10,000,000). 

Alabama,  Civil  Code,  §  1259. 
Missouri,  R.  S.,  §  1320. 

Sec.  h.    The  maximum  shall  not  exceed  twenty  times  the  mini- 
mum capital. 

Virginia,  L.  1890,  p.  56. 

Sec.  i.    There  is  no  limitation  on  the  maximum  amount. 

The  restrictive  statutes  in  Maine,  North  Carolina  and 
West  Virginia  have  recently  been  repealed,3  and  the  rule 
of  no  limitation  on  the  maximum  capital  now  prevails  in 

3  Maine,  L.  1901,  Ch.  229,  §  8  (formerly  $10,000,000)  ;  North  Carolina, 
L.  1901,  Ch.  47  (formerly  $1,000,000)  ;  West  Virginia,  L.  1901,  Ch.  35, 
§  2  (formerly  $5,000,000). 


Preliminary  Subscriptions  and  Payments.  171 

forty  states  and  territories,  that  is,  in  all  except  the  states 
of  Alabama,  Louisiana,  Massachusetts,  Michigan,  Missis- 
sippi, Missouri,  New  Hampshire,  Pennsylvania,  Vermont 
and  Virginia,  cited  above. 


TITLE  B.    PRELIMINARY  SUBSCRIPTIONS  AND  PAY- 
MENTS OP  CAPITAL  STOCK. 

The  total  amount  of  the  capital  stock  is  usually  not  required 
to  be  subscribed  in  advance,  but  may  be  issued  from  time 
to  time  to  meet  the  increasing  business  needs  of  the  cor- 
poration. Unless  some  other  provision  is  made  by  statute, 
the  only  subscribed  capital  required  to  enable  the  corpora- 
tion to  begin  business  is  one  share  of  each  of  the  three,  five, 
seven,  or  other  required  number  of  original  subscribers. 

By  the  contract  of  subscription  the  subscribers  become 
liable,  primarily  to  the  corporation  itself  and  contingently 
to  its  creditors,  to  pay  up  the  full  par  value  of  their  stock. 
Unless  otherwise  prescribed  by  statute,  the  time  and  manner 
of  payment  and  the  amount  of  the  several  instalments  may 
be  fixed  by  the  by-laws,  or  determined  by  the  stockholders 
or  by  the  directors  acting  under  their  authority.  Several 
states,  however,  require  a  certain  proportion  of  the  capital 
stock  to  be  subscribed,  or  paid  in,  or  both,  before  the 
corporation  can  begin  business  or  exercise  its  corporate 
functions. 


ART.  1.    A  CERTAIN  PROPORTION    OF   THE   TOTAL    CAPITAL   STOCK 
MUST  BE  SUBSCRIBED  BEFORE  BEGINNING  BUSINESS. 


Sec.  a.    The  minimum  capital  stock  named  in  the  charter. 
Virginia,  Code,  §§  1111,  1148. 

Sec.  b.    One  thousand  dollars.     ($1,000.) 

Delaware,  L.  1901,  Ch.  167,  §  5,  1"  4. 
New  Jersey,  L.  1896,  Ch.  185,  §  8,  If  4. 


172  Digest  of  Corporation  Laws. 

Sec.  c.    Ten  per  cent.    (10%.) 

Florida,  R.  S.,  §  2127. 

Ohio,  Ann.  Stat.,  §  3244.      (Ten  per  cent,  on  each 

share  subscribed.) 
Utah,  L.  1901,  Ch.  81. 

Sec.  d.    Fifty  per  cent.  (50%.) 

Alabama,  Civ.  Code,  §§    1142,  1255.      (By  solvent 

stockholders.) 
Connecticut,  G.  S.,  §  3365. 

Kentucky,  Stat.,  §  543.      (Subscribed  in  good  faith.) 
Oregon,  Ann.  L.,  §  3222. 
South  Carolina,  Code,  §§  1883,  1884. 
Texas,  L.  1901,  Ch.  15.      (Or  in  lieu  thereof,  $100,- 

000  may  be  paid  in.) 
Wisconsin,  Stat.,  §  1773. 

Sec.  e.    The  full  amount  of  the  capital  stock. 

Missouri,  R.  S.,  §  1312.      (Bona  fide  subscribed.) 
Washington,  Code,  §  4250. 

ART.  2.    A    CERTAIN   PROPORTION    OF    THE    AMOUNT    ORIGINALLY 
SUBSCRIBED  MUST  BE  PAID  IN  BEFORE  BEGINNING  BUSINESS. 

Unless  it  appears  in  Article  1  that  a  certain  amount  is 
required  to  be  subscribed,  these  payments  need  be  made 
only  on  the  nominal  number  of  shares  necessary  for  incor- 
poration. Unless  otherwise  stated,  these  initial  payments 
need  not  be  made  in  money  if  the  law  authorizes  the  pay- 
ment of  stock  by  property  or  services.  See  below,  Title  D. 

Sec.  a.    Two  per  cent.  (2%.) 

Virginia,  Code,  §§  1106,  1107.      ($2  each  on  shares 
of  $100.) 


Preliminary  Subscriptions  and  Payments.    173 
Sec.  b     Ten  per  cent.  (10%.) 

New  York,  G.  L.,  Ch.  36,  §  41;  Ch.  41,  §§  2,  5. 
(Ten  per  cent,  on  all  subscriptions 
which  are  payable  in  money.  Initial 
capital  of  $500  required.  One-halL 
total  capital  stock  to  be  paid  within 
one  year,  or  the  corporation  will  be 
dissolved.) 

Ohio,  Ann.  Stat.,  §  3243.  (Ten  per  cent,  on  each 
share  subscribed. ) 

West  Virginia,  Code,  Ch.  54,  §  25. 

Sec.  c.    Twenty  per  cent.  (20%). 

Connecticut,   G.  S.,   §    3365.       (And  not   less  than 

$1,000.) 
South  Carolina,  Code,  §    1884.      (Twenty  per  cent. 

of  the  aggregate  subscriptions.) 

ART.  3.    A  CERTAIN  PROPORTION  OF    THE    TOTAL    CAPITAL    STOCK 
MUST  BE  PAID  IN  BEFORE  BEGINNING  BUSINESS. 

Sec.  a.    Ten  per  cent.  (1O%.) 

District  of  Columbia,  Code,  §  613. 

Florida,  E,  S.,  §  2127. 

Georgia,  Code,  §  2350. 

Michigan,  Comp.  L.,  §  7038.  (Manufacturing  and 
mercantile  corporations.) 

Pennsylvania,  Dig.  L.  Corporations,  §  6.  (Paid  in 
cash.) 

Texas,  L.  1901,  Ch.  15.  (Or  $100,000  may  be  paid 
in,  in  lieu  of  any  further  original  pay- 
ment or  subscription.) 

Utah.     L.  1901,  Ch.  81. 

Sec.  b.    Twenty  per  cent.  (20%.) 

Alabama,  Civ.  Code,  §§  1142,  1255. 
Kansas,  G.  S.,  §  1311.      (Paid  in  actual  cash.) 
Wisconsin,  Stat.,  §  1773. 


174  Digest  of  Corporation  Laws. 

Sec.  c.    Twenty-five  per  cent.  (25%.) 

Vermont,   Stat.,   §   3724.      (Before    contracting    any 
debts.) 

Sec.  d.    Fifty  per  cent.  (50%.) 

Missouri,  K.  S.,  §  1312.      (Actually  paid  in  money.) 
Sec.  e.    The  total  capital  stock  must  be  paid  in. 

Massachusetts,  R.  L.,  Ch.  110,  §  43. 

New  Hampshire,  P.  S.,  Ch.  150,  §  8.  (On  penalty 
of  the  stockholders  being  jointly 
and  severally  liable  for  all  cor- 
porate debts.) 

TITLE  C.    PREFERRED  STOCK. 

Preferred  stock  may  give  the  holder  priority  in  dividends 
to  the  extent  agreed  upon,  or  priority  in  assets  upon  the 
dissolution  of  the  corporation,  or  both.  If  the  general  law 
authorizes  the  issue  of  preferred  stock,  and  if  the  amount 
to  be  issued  and  the  extent  of  the  preferences  are  set  out  in 
the  charter,  the  subscribers  of  common  stock  take  with 
notice,  and  no  contract  right  is  impaired.  The  legal  right 
to  issue  preferred  stock  after  the  common  stock  has  been 
subscribed,  is  less  clear,  but  it  is  recognized  by  the  weight 
of  authority. 

In  a  few  states  preferred  stock  is  issued  as  a  matter  of 
practice  without  any  special  statutory  sanction  but  its  legal- 
ity is  doubtful.  The  issue  of  preferred  stock  is  expressly 
authorized  in  the  following  states  :  — 

Alabama,  Constit.,  Art.  14,  §  9  ;  Civ.  Code,  §  1269. 

(By  two-thirds  vote.) 
Connecticut,  G.  S.,   §§    3326-3328.      (By  two-thirds 

vote.) 
Delaware,  L.  1901,  Ch.  167,  §  13.      (If  the  charter 

so    provides,    or    by    two-thirds  vote. 

Total  amount  not  to  exceed  two-thirds 

of  the  paid-in  capital.     Dividends  not 

over  8  per  cent.) 


Preferred  Stock.  175 

Indiana,  Ann.  Stat.,  §§  5064,  5070.  (If  the  char- 
ter so  provides,  or  by  three-fourths 
vote.  Amount  not  over  twice  the 
common  stock.  Dividends  not  over 
8  per  cent.) 

Kansas,  G.  S.,  §  1287.      (By  unanimous  vote.) 

Kentucky,  Stat.,  §  564.  (Cannot  be  issued  except 
for  cash  or  its  equivalent,  nor  for  less 
than  the  par  value  of  the  shares.) 

Maine,  L.  1901,  Ch.  229,  §  11.  (If  the  charter  so 
provides,  or  by  majority  vote.) 

Maryland,  P.  G.  L.,  Art.  23,  §  294.  (May  be  issued 
by  majority  vote  in  lieu  of  bonds,  if 
the  corporation  has  the  power  to  issue 
bonds.) 

Massachusetts,  L.  1902,  Ch.  441.  (By  two-thirds 
vote.  Amount  not  to  exceed  out- 
standing general  stock.) 

Michigan,  Comp.  L.,  §  7073.  (In  case  of  manu- 
facturing and  mercantile  corporations. 
Amount  of  such  stock  not  to  exceed 
two-thirds  of  paid-in  capital  stock. 
Dividends  not  over  8  per  cent.) 

Minnesota,  Stat.,  §  3415.  (If  the  charter  so  pro- 
vides, or  by  majority  vote.) 

Missouri,  R.  S.,  §§  1312,  1332.  (If  the  charter  so 
provides,  or  the  capital  stock  may  be 
increased  by  the  issue  of  preferred 
stock  by  unanimous  vote.) 

New  Hampshire,  P.  S.,  Ch.  149,  §  8. 

New  Jersey,  L.  1896,  Ch.  185,  §§  8,  18,  27.  (Not 
to  exceed  two-thirds  of  the  paid-in 
capital.  Dividends  not  to  exceed  8 
per  cent.) 

New  York,  G.  L.,  Ch.  36,  §  44.  (If  the  charter  so 
provides,  or  by  two-thirds  vote,  pro- 
vided the  total  capital  stock  is  not 
increased  by  such  issue.) 

North  Carolina,  L.  1901,  Ch.  2,  §  8,  If  4.  (If  the 
charter  so  provides.) 


176  Digest  of  Corporation  Laws. 

Ohio,  Ann.  Stat.,  §§  3235,  3263;  L.  1902,  p.  622. 
(If  the  charter  so  states,  or  may  in- 
crease stock  by  issue  of  preferred 
stock  upon  consent  in  writing  of  three- 
fourths  in  amount  of  stockholders. 
Total  preferred  stock  not  to  exceed 
two-thirds  of  actual  capital  paid  in. 
Dividends  not  to  exceed  8  per  cent.) 

Rhode  Island,  G.  L.,  Ch.  176,  §  2.      (If  the  charter 
so  provides.) 

West  Virginia,  Code,  Ch.  53,  §  16;  L.  1901, 
Ch.  35,  §  5.  (If  the  charter  so  pro- 
vides, or  by  publication  and  majority 
vote.  But  the  preferred  stock  shall 
not  exceed  the  maximum  capital  of 
the  corporation.) 


TITLE  D.    THE  METHOD  OP  PAYING  IN  THE  CAPITAL 

STOCK. 

ART.  1.    STOCK    MAY  BE    PAID  FOR  IN  PROPERTY  ACTUALLY    RE- 
CEIVED FOR  THE  USE  OF  THE  CORPORATION. 

This  provision  is  subject  to  the  general  restriction  that 
corporations  can  acquire  such  property  only  as  is  necessary 
or  useful  for  the  advancement  of  the  purposes  for  which  they 
are  incorporated. 

Sec.  a.    In  property  of  a  specified  kind  only. 
Par.  1.    Lands. 

Michigan,  Comp.  L.,  §  8533.  (Lands  situated  in 
the  state.) 

Tennessee,  Code,  §  2335.  (In  case  of  mining  cor- 
porations.) 

Par.  2.    Lands  or  patents. 

Tennessee,  Code,  §  2351. 
Par.  3.   Mining:  claims. 

Nevada,  Comp.  L.,  §  889. 


Method  of  Payment  for  Capital  Stock.      177 

Par.  4.    The  manufacturing  establishment  of  a  manufacturing  com- 
pany. 

Rhode  Island,  G.  L.,  Ch.  180,  §  8.  (Provided  mem- 
bers of  the  company  take  two-thirds 
of  the  stock  in  the  corporation.) 


Sec.  b.    In  property  generally. 

Alabama,  Constit.,  Art.  14,  §  6  ;  Civ.  Code,  §§  1142, 
1254. 

Arkansas,  Constit.,  Art.  12,  §  8. 

California,  Constit.,  Art.  12,  §  11 ;  Civ.  Code,  §  359. 

Colorado,  Constit.,  Art.  15,  §  9. 

Connecticut,  G.  L.,  §  3368. 

Delaware, Constit.,  Art. 9,  §  3;  L.1901,Ch.  167, §14. 

District  of  Columbia,  Code,  §  613. 

Florida,  L.  1901,  Ch.  4896. 

Idaho,  Code,  §  2119. 

Kentucky,  Constit.,  §  193;  Stat.,  §  568. 

Louisiana,  Constit.,  Art.  266. 

Maryland,  P.G.L.,  Art.  23,  §§  61,  62. 

Massachusetts,  R.  L.,  Ch.  110,  §  44. 

Missouri,  Constit.,  Art.  12,  §  8  ;  R.  S.,  §  962. 

Montana,  Constit.,  Art.  15,  §  10.  (Mining  corpo- 
rations.) 

New  Jersey,  L.  1896,  Ch.  185,  §§  48,  49.  (Mines, 
manufactories,  or  other  property.) 

New  York,  G.  L.,  Ch.  36,  §  42. 

North  Carolina,  L.  1901,  Ch.  2,  §  54.  (Mines, 
manufactories  or  other  property.) 

North  Dakota,  Civ.  Code,  §  2877. 

Pennsylvania,  Dig.  L.,  Corporations,  §  43.  (Real 
and  personal  estate,  mineral  rights, 
patent  rights  and  other  property.) 

South  Carolina,  Constit.,  Art.  9,  §  10  ;  Code,  §§  1881, 
-   1882. 

Texas,  Constit.,  Art.  12,  §  6. 
Utah,  L.  1901,  Ch.  81. 
Vermont,  Stat.,  §  3724. 


178  Digest  of  Corporation  Laws. 

Virginia,  Code,  §  1148;  L.  1890,  p.  56.  (Land 
or  other  property,  leases,  options, 
mines,  minerals  and  mineral  rights, 
rights  of  way  and  other  rights  or 
easements.) 

Washington,  Constit.,  Art.  12,  §  6. 

West  Virginia,  Code,  Ch.  53,  §  24;  L.  1901,  Ch. 
35,  §  8. 

Wisconsin,  Stat.,  §  1753;  L.  1899,  Ch.  193. 

Wyoming,  R.  S.,  §  3046. 

ART.  2.    STOCK  MAY  BE  PAID  FOR  BY  LABOR  OR  SERVICES  PER- 
FORMED FOR  THE  CORPORATION. 

Alabama,  Constit.,  Art.  14,  §  6 ;  Civ.  Code,  §§  1142, 
1254.  (Stipulated  necessary  labor  or 
services.) 

Arkansas,  Constit.,  Art.  12,  §  8. 

California,  Constit.,  Art.  12,  §  11 ;  Civ.  Code,  §  359. 

Colorado,  Constit.,  Art.  15,  §  9. 
•  Delaware,  L.  1901,  Ch.  167,  §  14. 

Florida,  L.  1901,  Ch.  4896. 

Idaho,  Code,  §  2119. 

Kentucky,  Constit.,  §  193;  Stat.,  §  568. 

Maine,  L.  1901,  Ch.  229,  §  13. 

Missouri,  Constit.,  Art.  12,  §  8  ;  R.  S.,  §  962. 

Montana,  Constit.,  Art.  15,  §  10. 

North  Dakota,  Civ.  Code,  §  2877. 

South  Carolina,  Constit.,  Art.  9,  §  10  ;  Code,  §  §  1881, 
1882. 

Texas,  Constit.,  Art.  12,  §  6. 
Utah,  Constit.,  Art.  12,  §  5. 
Virginia,  Code,  §  1148;  L.  1890,  p.  56. 
Washington,  Constit.,  Art.  8,  §  6. 

Wisconsin,  Stat.,  §  1753;  L.  1899,  Ch.  193. 

ART.  3.    MISCELLANEOUS  PROVISIONS. 

Indiana,  Ann.  Stat.,  §  5060.  (The  full  amount  of 
the  capital  stock  must  be  paid  into  the 
treasury  within  eighteen  months.) 


The  Measure  of  Valuation.  179 

Minnesota,  Stat.,  §  3415.  (Shares  shall  not  be 
issued  for  a  less  amount  to  be  actually 
paid  in  than  their  par  value.) 

New  Hampshire,  P.  S.,  Ch.  149,  §  9.  (No  corpo- 
ration shall  sell  shares  below  their  par 
value,  except  when  sold  at  auction  for 
non-payment  of  assessments.) 


TITLE  E.  THE  MEASURE  OF  VALUATION  AT  WHICH 
PROPERTY  OR  SERVICES  SHALL  BE  TAKEN  IN 
PAYMENT  OP  STOCK. 

ART.  1.    AT  THE  AMOUNT  OF  THE  VALUE  THEREOF. 

Colorado,  Ann.  Stat.,  §  490.      (See  Art.  13,  below.) 

Maine,  L.  1901,  Ch.  229,  §  13.  (See  Arts.  11,  13, 
below.) 

New  Jersey,  L.  1896,  Ch.  185,  §  49.  (In  all  reports 
the  stock  shall  be  stated  to  be  issued 
for  property,  not  for  cash.  See  Arts. 
11,  13,  below.) 

New  York,  G.  L.,  Ch.  36,  §  42.  (In  all  reports 
such  stock  is  to  be  described  as  issued 
for  property,  not  for  cash.  See  also 
Arts.  11,  13,  below.) 

North  Carolina,  L.  1901,  Ch.  2,  §  54.  (And  in  all 
reports  such  stock  shall  be  described 
as  issued  for  property.  See  Arts.  11, 
13,  below.) 

Pennsylvania,  Dig.  L.,  Corporations,  §  43.  (And 
the  stock  shall  be  described  in  the 
charter  as  issued  for  property,  not 
for  cash.  See  Art.  13,  below.) 

Wyoming,  R.  S.,  §  3046.  (As  fixed  by  the  direc- 
tors.) 

ART.  2.    AT  THE  ACTUAL  VALUE. 

Connecticut,  G.  L.,  §  3368.      (See  Art.  11,  below.) 
District  of  Columbia,  Code,  §  613. 


180  Digest  of  Corporation  Laws. 


ART.  3.  AT  THE  TRUE  MONEY  VALUE. 

North  Dakota,  Civ.  Code,  §  2877.  (On  penalty  of 
the  officers  being  liable  for  the  excess 
valuation.) 

South  Carolina,  Code,  §§  1881,  1882.  (As  fixed  by 
the  original  corporators.  And  the 
description  and-  value  of  the  labor  or 
property  shall  appear  in  the  list  of 
subscriptions.) 

ART.  4.    AT  THE  FAIR  CASH  VALUE. 

Massachusetts,  R.  L.,  Ch.  110,  §  44.  (As  sworn  to 
by  the  president,  treasurer  and  a  ma- 
jority of  directors,  and  approved  by 
the  Commissioner  of  Corporations.) 

Tennessee,  Code,  §  2335. 

Utah,  L.  1901,  Ch.  81.  (Except  in  the  case  of 
mining  corporations,  the  valuation  must 
be  verified  by  the  sworn  affidavits  of 
three  persons  acquainted  with  the  prop- 
erty.) 

ART.  5.    AT  THE   MARKET  PRICE. 

Kentucky,  Stat.,  §  568. 

ART.  6.    AT  THE  REASONABLE  VALUE. 

Alabama,  Civ.  Code,  §§  1142,  1254.  (As  fixed  by 
the  original  corporators.) 

ART.  7.    AT  THE  APPRAISED  VALUE. 

Rhode  Island,  G.  L.,  Ch.  180,  §  8.  (As  fixed  by 
the  town  assessor.  See  Title  D,  Art.  1, 
Sec.  a,  Par.  4.) 

ART.  8.    AT  A  JUST  VALUATION. 

Florida,  L.  1901,  Ch.  4896.  (As  fixed  by  the  direc- 
tors at  a  special  meeting.) 


The  Measure  of  Valuation.  181 


ART.  9.    AT  A  VALUATION  AGREED  UPON  BETWEEN    THE    CORPO- 
RATION AND  THE  SUBSCRIBER. 

Maryland,  P.  G.  L.,  Art.  23,  §  61.  (Provided  the 
same  is  authorized  by  a  general  meet- 
ing of  the  stockholders.) 

West  Virginia,  Code,  Ch.  53,  §  24 ;  L.  1901, 
Ch.  35,  §  8.  (As  agreed  upon  by  the 
owners  and  directors  or  stockholders. 
A  description  of  the  property  must 
appear  in  the  records  of  the  corpora- 
tion. See  Arts.  12,  13,  below.) 

ART.  10.    AT  AN  ARBITRARY  VALUE. 

Montana,  Code,  §  410.  (On  mines  any  arbitrary 
value  may  be  fixed,  and  such  value 
shall  be  regarded  as  the  value  thereof, 
so  as  to  make  stock  issued  therefor  at 
such  arbitrary  value  full  paid  stock.) 

ART.  11.    IN  THE  ABSENCE  OF  ACTUAL  FRAUD  IN  THE  TRANSAC- 
TION, THE  JUDGMENT  OF  THE  DIRECTORS  SHALL  BE  CONCLUSIVE. 

Connecticut,  G.  L.,  §  3368.  (But  in  case  of  fraud 
or  gross  over-valuation  the  directors 
concurring  therein  shall  be  liable  for 
the  excess.) 

Delaware,  L.  1901,  Ch.  167,  §  14. 

Maine,  L.  1901,  Ch.  229,  §  13. 

New  Jersey,  L.  1896,  Ch.  185,  §  49. 

New  York,  G.  L.,  Ch.  36,  §  42. 

North  Carolina,  L.  1901,  Ch.  2,  §  54. 

ART.  12.    IN  THE  ABSENCE  OF  ACTUAL  FRAUD  IN  THE  TRANSAC- 
TION, THE  VALUATION  FIXED  SHALL  BE  CONCLUSIVE. 

West  Virginia,  Code,  Ch.  53,  §  24 ;  L.  1901,  Ch. 
35,  §  8. 

ART.  13.    STOCK  SO  ISSUED  SHALL  BE  FULL-PAID  STOCK  AND  NOT 
LIABLE  TO  ANY  FURTHER  ASSESSMENT. 

Colorado,  Ann.  Stat.,  §  490. 
Maine,  L.  1901,  Ch.  229,  §  13. 


182  Digest  of  Corporation  Laivs. 

New  Jersey,  L.  1896,  Ch.  185,  §  49. 
New  York,  G.  L.,  Ch.  36,  §  42. 
North  Carolina,  L.  1901,  Ch.  2,  §  54. 
Pennsylvania,  Dig.  L.,  Corporations,  §  43. 
West  Virginia,  Code,  Ch.  53,   §24;    L.  1901,  Ch. 
35,  §  8. 


Stockholders'  Liability.  183 


CHAPTER  III. 

THE  LIABILITY   OF  STOCKHOLDERS  FOR  DEBTS  OF 
THE  CORPORATION. 


TITLE    A.     UNDER    WHAT    CONDITIONS    STOCK- 
HOLDERS BECOME  LIABLE. 

The  liability  of  the  stockholders  to  creditors  of  the  cor- 
poration differs  essentially  from  their  liability  to  the  cor- 
poration itself.  The  latter  liability  is  directly  contractual. 
The  subscribing  stockholders  are  bound  by  the  contract  of 
subscription  to  pay  the  full  face  value  of  their  shares  in  such 
instalments  and  in  such  manner  as  may  be  prescribed  by  the 
laws  of  the  state  and  the  charter  and  by-laws  of  the  cor- 
poration. In  case  of  default  the  liability  may  be  enforced 
by  the  ordinary  remedies.  The  corporation  usually  has  a 
lien  on  the  stock  and  may  sell  the  stock  in  satisfaction  of 
the  debt  and  may  collect  the  deficiency,  if  any,  by  a 
personal  action  against  the  delinquent  stockholder. 

On  the  other  hand,  as  a  corporation  is  a  legal  entity 
distinct  from  the  stockholders  who  constitute  it,  no  debts  or 
obligations  incurred  by  it  can,  in  the  absence  of  a  direct 
statutory  provision,  impose  any  legal  liability  on  the  stock- 
holders. But  in  equity  the  debts  of  the  stockholders  to  the 
corporation  are  regarded  as  equitable  assets  of  the  corpora- 
tion, and  may  be  reached  by  creditors  if  the  legal  assets 
prove  insufficient.  "The  capital  stock  of  an  incorporated 
company  is  a  fund  set  apart  for  the  payment  of  its  debts. 
.  .  .  It  is  publicly  pledged  to  those  who  deal  with  the  cor- 
poration, for  their  security.  Unpaid  stock  is  as  much  a 
part  of  this  pledge,  and  as  much  a  part  of  the  assets  of  the 
company  as  the  cash  which  has  been  paid  in."4  The  stock- 
danger  v.  Upton,  91  U.  S.  60.  See  also  Morawetz,  Corporations, 
§  818  ff. 


184  Digest  of  Corporation  Laws. 

holders  thus  become  ultimately  liable  for  the  debts  of  the 
corporation  to  the  extent  of  the  unpaid  balance  on  their 
stock.  They  are  also  in  many  states  subject  to  other 
statutory  liabilities,  as  shown  in  the  following  title.  The 
statutory  remedy  is  usually  by  an  equitable  action  but  in 
some  states  may  be  by  an  action  at  law.  In  nearly  all  such 
statutory  provisions  the  liability  of  stockholders  is  intended 
merely  as  a  secondary  security  for  creditors  in  case  the 
assets  of  the  corporation  are  insufficient  to  meet  its  debts. 
But  in  special  cases  the  stockholders  may  be  made  parties 
defendant  in  an  original  action,  and  if  they  are  obliged  to 
pay  any  debt  of  the  corporation  they  have  an  action  over, 
against  the  corporation,  for  the  amount  so  paid,  and  are 
usually  entitled  also  to  exact  contribution  from  the  other 
stockholders.  The  usual  rule,  however,  both  of  the  com- 
mon and  the  statute  law  is  that  creditors  must  first  exhaust 
their  remedy  against  the  corporation. 

ART.  1.  THE  LIABILITY  OF  STOCKHOLDERS  IS  CONDITIONAL  UPON 
THE  INSOLVENCY  OF  THE  CORPORATION,  ITS  DISSOLUTION 
LEAVING  DEBTS  UNPAID,  OR  THE  RETURN  OF  AN  UNSATIS- 
FIED EXECUTION  AGAINST  IT. 

In  the  states  which  have  no  special  statute  on  the  subject, 
a  similar  rule  is  commonly  applied. 

Arizona,  R.  S.,  §  776. 

Colorado,  Ann.  Stat.,  §  497. 

Connecticut,  G.  S.,  §§  3369,  3381. 

Delaware,  L.  1901,  Ch.  167,  §  51. 

District  of  Columbia,  Code,  §  794. 

Florida,  E.  S.,  §  2152. 

Georgia,  Code,  §  1894. 

Idaho,  Code,  §  2119.  (When  the  liability  does  not 
arise  upon  contract.) 

Illinois,  E.  S.,  Ch.  32,  §  25. 

Indiana,  E.  S.,  §  3451. 

Iowa,  Code,  §§  1631,  1632. 

Kansas,  G.  S.,  §  1302. 

Massachusetts,  E.  L.,  Ch.  110,  §  60.  (Provided  the 
corporation  has  neglected  for  thirty 
days  to  pay  an  execution  against  it. ) 


Stockholders'  Liability.  185 

Michigan,  Comp.  L.,  §§  7065,  8555. 

Minnesota,  Stat.,  §§  2796,  2601. 

Missouri,  R.  S.,  §§  985,  987. 

Nebraska,  Comp.  Stat.,  §  1839. 

New  Jersey,  L.  1896,  Ch.  185,  §  94. 

New  York,  G.  L.,  Ch.  36,  §  55. 

North  Carolina,  L.  1901,  Ch.  2,  §  92. 

Pennsylvania,  Dig.  L.,  Corporations,  §  69.  (Stock- 
holders may  be  joined  in  the  suit,  but 
execution  is  first  levied  on  the  cor- 
porate property.) 

I^Itode  Island,  G.  L.,  Ch.  180,  §  22.  (Or  a  bill  in 
equity  may  be  brought,  and  the  stock- 
holders paying  have  an  action  over, 
against  the  corporation.) 

Texas,  R.  S.,  §  671. 

ART.  2.    ACTION  MUST   BE  BROUGHT    WITHIN  A  LIMITED    PERIOD 
AFTER  THE  DEBT  WAS  CONTRACTED. 

In  the  absence  of  any  special  provision,  the  statute  of 
limitations  in  regard  to  ordinary  actions  of  contract  will 
apply.  In  addition  to  the  general  provisions  in  the  follow- 
ing citations,  there  are  other  provisions  limiting  the  period 
for  enforcing  the  special  liability  of  stockholders  for  the 
wages  of  employees  of  the  corporation.  See  Title  B,  Art. 
6,  below.  Moreover  in  the  states  where  the  stockholder's 
liability  is  not  released  by  a  transfer  of  his  stock,  there  is 
frequently  a  provision  that  action  must  be  brought  within  a 
limited  period  after  he  ceased  to  hold  the  stock.  See  Title 
C,  Art.  1,  below. 

Maine,  R.  S.,  Ch.  46,  §  47.  (Within  two  years 
since  right  of  action  accrued.) 

Missouri,5  R.  S.,  §  1330.  (Within  one  year  since 
debt  contracted.) 

New  York,  G.  L.,  Ch.  36,  §  55.  (Within  two  years 
since  debt  contracted.) 

5  But  this  limitation  has  been  held  to  apply  only  to  a  former  statutory 
liability  now  repealed.  It  is  "  a  dead  branch  which  has  escaped  the 
pruning  knife  of  the  revisers.1'  Hauser  v.  Thompson,  56  Mo.,  App.  85. 


186  Digest  of  Corporation  Laws. 

Utah,  R.  S.,  §  2897.  (Within  three  years  after 
discovery  of  the  facts  upon  which  the 
liability  was  created.) 

TITLE  B.     THE   EXTENT  OP  THE  LIABILITY. 

ART.  1.    STOCKHOLDERS   ARE  INDIVIDUALLY  LIABLE   TO   THE  EX- 
TENT OF  THE   UNPAID  BALANCE  ON  THEIR  STOCK. 

This  is  simply  a  statutory  statement  of  the  ordinary 
equitable  rule,  and,  where  the  law  is  silent,  a  similar  liability 
can  usually  be  enforced  in  a  court  of  chancery. 

Sec.  a.    Without  further  liability. 

Alabama,  Constit.,  Art.  14,  §  8  ;  Civ.  Code,  §  2182. 

Arizona,  R.  S.,  §  776. 

Colorado,  Ann.  Stat.,  §  486. 

District  of  Columbia,  Code,  §  615. 

Georgia,  Code,  §  2350. 

Illinois,  R.  S.,  Ch.  32,  §  8. 

Kentucky,  Stat.,  §  547  ;  L.  1902,  Ch.  10. 

Louisiana,   R.   L.,    §    690;   L.    1888,    Ch.   36,  §  3. 

Maryland,  P.  G.  L.,  Art,  23,  §  64. 

Missouri,  Constit.,  Art.  12,  §  9;  R.  S.,  §§  985, 
1330. 

Montana,  Civ.  Code,  §  470. 

Oklahoma,  Stat,,  §  963. 

Oregon?  Constit.,  Art.  11,  §  3.  (And  to  such  extent 
the  solvent  stockholders  must  pay  the 
amount  of  liability  of  the  insolvent.) 

South  Carolina,  Constit.,  Art.  9,  §  18  ;  Code,  §  1852. 
(And  no  reduction  of  the  capital  stock 
shall  impair  such  liability.) 

South  Dakota,  Ann.  Stat,,  §  3851. 

Texas,  R.  S.,  §§  671,  686. 

Utah,  R.  S.,  §§  330,  331. 

Virginia,  Code,  §§  1130,  1148;  L.  1890,  Ch.  73. 
Washington,  Constit.,  Art.  12,   §  4;  Code,  §  4266. 
Wyoming,  R.  S.,  §  3045. 

6  Hodges  v.  Mining  Co.,  9  Oregon,  200. 


Stockholders'  Liability.  187 

Sec.  b.    In  addition  to  other  liabilities. 

Connecticut,  G.  S.,  §  3369.     (See  also  Art.  7,  Sec. 

a,  below.) 
Delaware,  L.  1901,  Ch.  167,  §§   20,  28.      (See  also 

Art.  7,  Sec.  c,  below.) 
Florida,  R.  S.,   §§   2152,  2156.      (See  also  Arts.  8 

and  9,  below.) 

Idaho,  Code,  §  2119.      (See  also  Art.  9,  below.) 
Iowa,  Code,  §  1631.      (See  also  Art.  8,  below.) 
Maine,  R.   S.,  Ch.  46,  §§  44,  47.      (For  unsecured 

debts  only.     See  also  Art.   7,  Sec.  c, 

below.) 
Minnesota,    Constit.,  Art.  10,  §    3;    Stat.,  §§  2796, 

2600.     (Manufacturing  and  mechanical 

corporations.     See  also  Arts.  7,  8,  9, 

below.     For   the  greater   liability  of 

stockholders  in  other  corporations  see 

Art.  b,  below.) 
Mississippi,  Code,   §   844;  L.   1894,  Ch.  55.      (See 

also  Art.  7,  Sec.  b,  below.) 
Nebraska,     Constit.,    §     271.       (See   also    Art.    8, 

below.) 
New  Jersey,  L.  1896,  Ch.  185,  §  21.     (See  also  Art. 

7,  Sec.  c,  below.) 
New  York,  G.  L.,  Ch.  36,  §  54.      (See  also  Art.  6, 

below.) 
North   Carolina,  L.   1901,  Ch.  2,  §   22.      (See  also 

Art.  7,  Sec.  c,  and  Art.  9,  below.) 
North  Dakota,  Civ.  Code,  §  2902.      (See  also  Art. 

6,  below.) 

Tennessee,  Code,  §  2058.     (See  also  Art.  6,  below.) 
Vermont,  Stat.,  §   3725.      (See  also  Art.   7,  Sec.  c, 

below.) 
West  Virginia,  Constit.,   Art.  11,   §   2.      (See  also 

Art.  7,  Sees,  b  and  c,  below.) 
Wisconsin,  Stat.,  §   1756.     (See  also  Art.  7,  Sees. 

b  and  c,  below.) 


188  Digest  of  Corporation  Laws. 


ART.  2.  STOCKHOLDERS  WHO  HAVE  NOT  PAID  FOR  THEIR  STOCK 
IN  FULL  ARE  JOINTLY  AND  SEVERALLY  LIABLE  FOR  ALL 
CORPORATE  DEBTS. 

Massachusetts,  E.  L.,  Ch.  110,  §  59.  (Until  the 
whole  capital  stock  has  been  paid  in. 
See  also  Arts.  6,  7,  Sec.  below.) 

New  Hampshire,  P.  S.,  Ch.  150,  §§  8,  21,  22.  (All 
the  stockholders  are  so  liable,  but  they 
may  bring  suit  against  the  corporation 
or  exact  contributions  from  other  stock- 
holders. See  also  Art.  7,  Sec.  c, 
below. ) 

ART.  3.    STOCKHOLDERS  ARE  SEVERALLY  LIABLE  FOR  AN  AMOUNT 
EQUAL  TO  THE   AMOUNT  OF  THEIR  STOCK. 

Indiana,  E.  S.,  §  3451.  (See  also  Arts.  6,  7,  Sec. 
a,  below.) 

Rhode  Island,  G.  L.,  Ch.  180,  §§  1,  13,  23  ;  L.  1901, 
Ch.  839,  §  2.  (Stockholders  in  man- 
ufacturing corporations  are  jointly  and 
severally  liable  to  the  extent  of  the  par 
value  of  their  shares  until  the  whole 
capital  stock  has  been  paid  in.  But 
may  exact  contribution  from  other 
stockholders.  See  also  Art.  7,  Sec.  a, 
below.) 

ART.  4.  STOCKHOLDERS  ARE  LIABLE  FOR  SUCH  PROPORTION  OF 
ITS  DEBTS  AS  THEIR  STOCK  BEARS  TO  THE  TOTAL  CAPITAL 
STOCK. 

California,  Constit.,  Art.  12,  §  3  ;  Civ.  Code,  §  322  ; 
L.  1901,  Ch.  157,  §  76.  (And  are  not 
otherwise  liable.) 

ART.  5.  STOCKHOLDERS  ARE  LIABLE  FOR  AN  AMOUNT  EQUAL 
TO  THE  SUM  OF  THE  UNPAID  BALANCE  AND  THE  PAR  VALUE 
OF  THEIR  STOCK. 

Kansas,  Constit.,    §   211;   G.    S.,    §§    1302,    1315. 
«  (And  are  not  otherwise  liable.) 


Stockholder^  Liability.  189 

Minnesota,  Constit.,  Art.  10,  §  3  ;  Stat.,  §§  2796, 
2600.  (Except  manufacturing  and 
mechanical  corporations.  See  Art.  1, 
Sec.  b,  above.  See  also  Arts.  8  and  9, 
below.) 

Ohio,  Constit.,  Art.   13,   §   3;  Ann.   Stat.,   §   325$.- 
(And  are  not  otherwise  liable.) 

ART.    6.      STOCKHOLDERS    ARE    INDIVIDUALLY     LIABLE    FOR    THE 
WAGES  OF  EMPLOYEES    OF  THE   CORPORATION. 

Indiana,  R.  S.,  §  5077.  (Stockholders  in  manufac- 
turing, mining  and  mechanical  cor- 
porations are  liable  for  all  debts  due 
laborers,  servants,  apprentices  and 
employees.) 

Massachusetts,  R.  L.,  Ch.  110,  §  59.  (For  all 
money  due  operatives  within  six  months 
of  an  unsatisfied  demand  on  the  corpo- 
ration. But  may  exact  contribution 
from  other  stockholders.) 

Michigan,  Constit.,  Art.  15,  §  7  ;  Comp.  L.,  §  8566. 
(For  labor  performed  for  the  corpora- 
tion. But  may  exact  contribution 
from  other  stockholders.  See  also 
Art.  7,  Sec.  c,  below.) 

New  York,  G.  L.,  Ch.  36,  §  54.  (For  all  debts 
due  laborers,  servants  or  employees 
other  than  contractors.  But  demand 
must  be  made  on  stockholder  within 
thirty  days  after  termination  of  the 
services,  and  suit  brought  within  thirty 
days  after  an  unsatisfied  execution 
against  the  corporation.) 

North  Dakota,  Civ.  Code,  §  3157.  (Stockholders 
in  corporations  for  mining,  manufac- 
turing and  other  industrial  pursuits 
are  liable  for  debts  due  mechanics, 
workmen  and  laborers,  provided  action 
is  commenced  within  four  months. 
But  may  exact  contribution  from  other 
stockholders.) 


190  Digest  of  Corporation  Laws. 

Pennsylvania,  Dig.  L.,  Iron  and  Steel  Manufactur- 
ing Companies,  §  9.  (Stockholders  in 
such  corporations  are  liable  for  debts 
due  laborers,  mechanics  or  clerks,  for 
services  not  over  six  months.) 
Dig.  L.,  Manufacturing  Companies,  §  11. 
(Stockholders  in  other  manufacturing, 
mechanical  or  mining  corporations  are 
liable  for  debts  due  laborers,  clerks 
or  operatives  for  services  within  six 
months  before  an  unsatisfied  demand 
on  the  corporation,  but  not  over  $200. 
See  also  Art.  7,  Sec.  a,  below.) 
Dig.  L.,  Corporations,  §  68.  (Stock- 
holders in  other  corporations  are  liable, 
to  the  extent  only  of  the  amount  of 
stock  held  by  each,  for  all  work  or 
labor  to  carry  on  the  operations  of  the 
corporation.) 

Tennessee,  Code,  §  2337.  (For  all  moneys  due 
laborers,  servants,  clerks  and  opera- 
tives in  case  the  corporation  becomes 
insolvent.) 

Wisconsin,  Stat.,  §  1769.  (To  an  amount  equal  to 
the  stock  owned  by  them  respectively 
for  all  debts  due  clerks,  servants  and 
laborers . ) 


ART.  7.  STOCKHOLDERS  ARE  LIABLE  FOR  ANY  REFUND  OR  RE- 
DUCTION OF  THE  CAPITAL  STOCK  WHICH  IMPAIRS  THE 
SECURITY  OF  CREDITORS. 

Sec.  a.    Stockholders,   in  case   of  refund,    are  jointly   and 
severally  liable  for  all  debts  of  the  corporation. 

Connecticut,  G.  S.,  §  3381.  (All  stockholders 
voting  in  favor  of  a  reduction  which 
renders  the  corporation  insolvent.) 

Indiana,  R.  S.,  §  3430.  (If  any  refund  is  made 
before  all  debts  are  paid,  all  the  stock- 
holders are  liable.) 


Stockholders'  Liability.  191 

Pennsylvania,  Dig.  L.,  Manufacturing  Companies, 
§  4.  (In  case  of  manufacturing,  min- 
ing or  mechanical  corporations.  If 
any  refund  is  made  before  all  debts  are 
paid,  all  the  stockholders  are  liable.) 

Rhode  Mand,  G.  L.,  Ch.  180,  §  5.  (In  manufac- 
turing corporations.  If  any  refund  is 
made  before  all  the  debts  are  paid,  all 
the  stockholders  are  liable.) 

Sec.  b.  Stockholders  are  jointly  and  severally  liable  for  all 
corporate  debts  to  the  extent  of  the  whole  amount 
refunded. 

Massachusetts,  K.  L.,  Ch.  110,  §  59. 

Mississippi,  Code,  §  852.  (All  stockholders  receiv- 
ing such  refund.) 

West  Virginia,  Code,  Ch.  53,  §  40.  (All  stock- 
holders present  and  not  registering 
their  dissent  when  such  refund  is 
declared. ) 

Wisconsin,  Stat.,  §  1755.  (All  stockholders  voting 
for  such  refund.) 

Sec.  c.    Stockholders  are  individually  liable  to  the  extent  of 
the  refund  to  them  respectively. 

Arkansas,  Stat.,  §  1348.  (If  refund  is  made  before 
all  debts  are  paid.) 

Delaware,  L.  1901,  Ch.  167,  §  28.  (If  refund  is 
made  before  all  debts  are  paid  or  fully 
secured.) 

Maine,  R.  S.,  Ch.  46,  §  47. 

Michigan,  Comp.  L.,  §  7057.  (In  case  of  manufac- 
turing or  mercantile  corporations,  if  re- 
fund is  made  before  all  debts  are  paid.) 

Minnesota,  Stat.,  §  2822.  (In  case  of  manufactur- 
ing or  mechanical  corporation,  if  all 
debts  are  not  previously  paid.  But 
may  exact  contribution  from  other 
stockholders  receiving  refund.) 


192  Digest  of  Corporation  Laws. 

New  Hampshire,  P.  S.,  Ch.  150,  §  7.  (If  refund 
is  unlawfully  made.) 

New  Jersey,  L.  1896,  Ch.  185,  §  29. 

North  Carolina,  L.  1901,  Ch.  2,  §  32. 

Vermont,  Stat.,  §  3726.  (If  refund  is  made  before 
all  debts  are  paid.  But  may  exact 
contribution  from  other  stockholders 
receiving  refund.) 

West  Virginia,  Code,  Ch.  53,  §  40.  See  also 
Art.  7,  Sec.  b,  above.) 

Wisconsin,  Stat.,  §  1755.  (But  may  exact  contribu- 
tion from  other  stockholders  receiving 
refund.  See  also  Art.  7,  Sec.  b, 
above.) 

ART.  8.  STOCKHOLDERS  ARE  INDIVIDUALLY  LIABLE  FOR  THE 
FAILURE  OF  THE  CORPORATION  TO  COMPLY  WITH  CERTAIN 
PRESCRIBED  REGULATIONS  IN  REGARD  TO  ORGANIZATION 
AND  PUBLICITY. 

Florida,  R.  S.,  §  2127  ;  L.  1893,  Ch.  4169.  (Stock- 
holders become  liable  for  all  corporate 
debts  as  if  they  were  partners.) 

Iowa,  Code,  §  1616.  (The  individual  property  of 
the  stockholders  becomes  liable  for  all 
corporate  debts.) 

Minnesota,  Stat.,  §§  2796,  2600,  IF  2.  (The  private 
property  of  the  stockholders  becomes 
liable  for  corporate  debts.) 

Nebraska,  Comp.  Stat.,  §  1839.  (Stockholders  are 
jointly  and  severally  liable  for  all  cor- 
porate debts  to  an  amount  equal  to  the 
sum  of  the  unpaid  balance  and  the  par 
value  of  their  stock.) 

ART.  9.      STOCKHOLDERS    ARE    INDIVIDUALLY    LIABLE    FOR    ANY 
FRAUD  OR  MISCONDUCT    IN  SUCH   CAPACITY. 

Idaho,  Code,  §  2119.  (Stockholders  have  no  in- 
dividual liability  beyond  the  amount 
of  the  unpaid  balance  of  their  stock 


Stockholders'  Liability.  193 

except  when  liable  on  the  ground  of 
fraud  or  misrepresentation  or  conceal- 
ment, or  for  neglect  or  misconduct, 
as  an  officer,  agent,  stockholder  or 
member  of  the  corporation.) 

Minnesota,  Stat.,  §§  2796,  2600.  (For  any  unlaw- 
ful conduct  in  the  transaction  of  any 
business  of  the  corporation,  as  officer, 
director  or  member  thereof,  or  if  guilty 
of  any  fraud,  unfaithfulness  or  dis- 
honesty in  the  discharge  of  any  official 
duty.) 

North  Carolina,  L.  1901,  Ch.  2,  §  107.  (In  case 
of  fraud  by  the  president,  directors, 
managers  or  stockholders,  the  court 
shall  render  personally  liable  to  cred- 
itors and  others  injured  thereby  such 
of  the  directors  and  stockholders  as 
may  have  been  concerned  in  the  fraud.) 

South  Carolina,  Code,  §  1343.  (For  fraudulent 
representations  as  to  capital  or  re- 
sources of  the  corporation,  a  fine  of 
not  more  than  $2,000  or  imprisonment 
not  over  two  years.) 

ART.  10.    STOCKHOLDERS  HAVE  NO   STATUTORY  LIABILITY. 

Sec.  a.    The  law  is  silent  in  regard  to  their  liability. 

Indian  Territory. 
New  Mexico. 

Sec.  b.    They  are  expressly  exempt  from  any  liability. 

Nevada,  Constit.,  Art.  8,  §  3.  (Stockholders  in 
domestic  corporations  shall  not  be  in- 
dividually liable  for  the  debts  or  liabili- 
ties of  such  corporations.) 


194  Digest  of  Corporation  Laws. 


TITLE   C.      THE    LIABILITY    OF    STOCKHOLDERS     AS 
AFFECTED   BY  TRANSFERS   OF  STOCK. 

It  is  to  be  assumed  in  this  title  that  the  transfer  is  a  bona 
fide  transfer,  properly  recorded  on  the  books  of  the  corpora- 
tion. When  not  so  recorded,  the  rale  is  that  the  transfer  is 
not  valid  except  between  the  parties  thereto.  The  usual 
rule,  also,  both  of  the  common  and  the  statute  law,  is  that  a 
transfer  made  to  an  irresponsible  or  insolvent  person,  in 
order  to  escape  liability  as  a  stockholder  in  a  failing  concern, 
is  voidable  as  a  fraud  upon  creditors.7 

In  case  of  a  bona  fide  recorded  transfer  the  question  arises 
to  what  extent  the  obligations  of  the  transferor  are  thereby 
discharged,  and  to  what  extent  they  are  assumed  by  the 
transferee.  The  language  of  the  statutes  is  often  vague 
and  uncertain  on  this  point,  and  there  is  no  well  settled 
principle  of  judicial  construction,  as  similar  statutes  have 
been  differently  construed  by  different  courts.  There  are 
two  main  theories  for  determining  who  are  liable  as  stock- 
holders. The  first  is  that  the  liability  attaches  to  the  person 
owning  the  stock  when  the  corporate  debt  was  contracted. 
The  other  legal  theory  is  that  the  liability  attaches  to  the 
owner  of  the  stock  at  the  time  suit  is  brought  without  refer- 
ence to  the  time  when  the  debt  was  contracted.  These  two 
views  with  their  various  modifications  are  set  forth  in  detail 
below. 

The  liability  on  account  of  a  refund  of  the  capital  stock, 
or  for  failure  to  obey  certain  regulations,  or  for  fraud,  is 
personal  and  penal.  It  applies  to  the  persons  who  were 
holders  of  the  stock  at  the  time,  and,  as  it  does  not  attach 
itself  to  the  stock,  it  is  not  affected  by  transfer.  Such  liabili- 
ties, therefore,  do  not  come  within  the  scope  of  this  title. 
The  liability  is  also  to  be  understood  as  restricted  in  all 
cases  to  that  described  in  the  preceding  title.  In  very 
many  states,  therefore,  the  question  of  transfer  merely 
affects  the  obligation  for  the  unpaid  balance  on  the  stock. 

7  See  Cook,  Corporations,  §  263,  and  cases  cited. 


Stockholders'  Liability.  195 

ART.  1.    THE   LIABILITY   OF  THE   ORIGINAL  SUBSCRIBER  OR 
TRANSFEROR. 

The  term  original  subscriber  throughout  this  article  is  to 
be  taken  broadly  as  meaning  any  original  holder  of  stock. 

Sec.  a.    The  original  subscriber  alone  is  liable. 

Maine?  Ch.  46,  §  47.  (But  only  for  unsecured 
debts  contracted  during  his  ownership, 
if  action  is  brought  within  one  year 
after  transfer.) 

Massachusetts,  K.  L.,  Ch.  110,  §  59.  (For  debts 
contracted  before  the  capital  is  fully 
paid  in.  But  transferee  with  knowl- 
edge is  also  liable.  See  also  Art.  2, 
Sec.  b.) 

North  Carolina,  L.  1901,  Ch.  2,  §  22.  (Transferee 
taking  for  value  and  without  notice 
is  exempt  from  liability  for  unpaid 
balance  on  his  stock.) 

West  Virginia,  Constit.,  Art.  11,  §  2. 


Sec.  b.    The  original  subscriber  or  transferor  remains  liable 
as  well  as  the  transferee. 

In  this  and  the  following  section  the  transferee  becomes 
liable  for  existing  as  well  as  future  debts  but  the  transferor 
is  not  thereby  discharged. 

Illinois,  R.  S.,  Ch.  32,  §  8. 

loiva,9  Code,  §§   1626,  1631.      (Only  for  debts  con- 
tracted before  transfer.) 
Nebraska,™  Constit.,  §  271. 
New  Hampshire,  P.  S.,  Ch.  150,  §  8. 

8  Grindle  v.  Stone,  78  Me.  176  ;  Libbey  v.  Tobey,  82  Me.  897  ;  Barren 
v.  Burrill,  86  Me.  66 ;  Morgan  v.  Howland,  89  Me,  484. 

9  White  v.  Green,  105  Iowa,  176  ;  Calumet  Paper  Co.  v.  Stotts  Inv.  Co., 
96  Iowa,  147. 

10  National  Bank  v.  Gibson,  37  Neb.  750. 


196  Digest  of  Corporation  Laws. 

Rhode  Island,11  G.  L.,  Ch.  180,  §  1.  (In  case  of 
manufacturing  corporations.  But  only 
for  debts  contracted  during  his  owner- 
ship.) 

Virginia™  Code,  §  1130. 

Sec.  c.  The  original  subscriber  or  transferor  is  secondarily 
liable  upon  default  in  payment  by  the  transferee. 

Georgia,  Code,  §§  1888,  1889.  (If  the  corporation 
fails  within  six  months  after  transfer.) 

Ohio,15  Constit.,  Art.  13,  §  3  ;  Ann.  Stat.,  §  3258. 
(But  only  for  debts  contracted  during 
his  ownership.) 

Tennessee,  Code,  §  2058.  (When  the  liability  is  for 
the  unpaid  balance  of  the  stock  sub- 
scription.) 

Oregon,14  Code,  §  3230. 

Sec.  d.  The  original  subscriber  or  transferor  remains  liable 
for  the  debts  contracted  during  his  ownership  or  within 
a  limited  period  thereafter. 

Mississippi,  Code,  §  844,  L.  1894,  Ch.  55.  (Liabil- 
ity continues  for  one  year  after  trans- 
fer.) 

Wisconsin,  Stat.,  §  1756.  (Liability  continues  for 
six  months  after  transfer.) 


Sec.  e.  The  original  subscriber  or  transferor  remains  liable 
for  the  debts  contracted  during  his  ownership,  but  not 
for  debts  after  transfer. 

California,  Constit.,  Art.  12,  §  3  ;   Civ.  Code,  §  322  ; 

L.  1901,  Ch.  157,  §  76. 
Indiana,15  Ann.  Stat.,  §§  3451,  5077. 

11  Sayles  v  Bates,  15  R.  I.  342. 

12  Hamilton  v.  Glenn  Co,,  85  Va.  901. 

13  Harpold  v.  Stobart,  46  Ohio,  St.  397  ;  Wick.  Nat.  Bk.  v.  U.  Nat.  BkM 
62  Ohio,  St.  446 ;  Brown  v.  Hitchcock,  36  Ohio,  St.  667. 

14  Bush  v.  Cartwright,  7  Ore.  329. 

15  Williams  v.  Hanna,  40  Ind.  535. 


Stockholders*  Liability.  197 

Kentucky,  Stat.,  §  547;  L.  1902,  Ch.  10.  (Pro- 
vided action  is  brought  within  two 
years  after  transfer.) 

Maryland.™  P.  G.  L.,  Art.  23,  §  64. 

Michigan,17  Comp.  L.,  §  8566. 

Minnesota,18  Stat.,  §§  2796,  2599,  2600.  (The  liar" 
bility  of  the  transferor  is  confined  to 
the  par  value  of  his  stock.  He  is  re- 
leased by  transfer  from  any  additional 
liability  for  the  unpaid  balance  on  the 
stock.) 

New  York™  G.  L.,  Ch.  36,  §§  54,  55.  (Provided 
action  is  brought  within  two  years  after 
transfer,  and  within  two  years  after  the 
maturity  of  the  debt. 

Tennessee ,20  Code,  §2337.  (In  case  of  statutory 
liability  to  employees.  See  also  Sec- 
tion c,  above.) 

Sec.  f.    The  liability  of  the  original  subscriber  or  transferor 
ceases  upon  the  transfer  of  his  stock. 

See  Article  2,  Section  b,  below. 

ART.  2.    THE  LIABILITY  OF  THE  TRANSFEREE  AND   HOLDER. 

Sec.  a  Though  the  liability  of  the  transferor  is  not  dis- 
charged, the  transferee  becomes  liable  for  all  debts 
contracted  both  before  and  after  transfer. 

See  Article  1,  Sections  b  and  c,  above. 

16  Hager  v.  Cleveland,  36  Md.  476  ;  Weber  v.  Fickey,  47  Md.  196. 

17  Kamp  v.  Wintermute,  65  N.  W.  Rep.  570 ;  Macomber  v.  Wright,  65 
N.  W.  Rep.  610. 

18  The  statute  has  been  so  construed  in  Gunnison  v.  U.  S.  Investment 
Co.,  70  Minn.  292.     See  also  In  re  People's  Live  Stock  Insurance  Co. 
56  Minn.,  180. 

19  Tucker  v.  Gilman,  121  N.  Y.  189 ;  Sinclair  v.  Dwight,  9  App.  Div. 
(N.  Y.)  297. 

20  Jackson  v.  Meek,  87  Tenn.  69. 


198  Digest  of  Coloration  Laws. 


Sec.  b.  Upon  transfer,  tHe  transferee  becomes  liable  for  all 
debts  contracted  both  before  and  after  transfer,  and 
the  transferor  is  discharged. 

In  other  words  the  transfer  operates  as  a  complete  nova- 
tion of  existing  debts  and  obligations.  The  liability  attaches 
to  those  who  are  stockholders  when  action  is  brought,  or 
when  an  execution  against  the  corporation  is  returned 
unsatisfied.  A  transfer  after  the  liability  has  attached  does 
not  release  it. 

Alabama?1  Civ.  Code,  §  2182. 

Arizona,  R.  S.,  §  776. 

Arkansas,  Stat.,  §  1338. 

Colorado,  Ann.  Stat.,  §  486. 

Connecticut™  G.  S.,  §  3369. 

Delaware,  L.  1901,  Ch.  167,  §§  20,  28. 

District  of  Columbia,  Code,  §  615. 

Florida,  R.  S.,  §§  2152,  2156. 

Idaho,  Code,  §  2119. 

Kansas,™  Constit.,  §  211;  G.  S.,  §§  1302,  1315. 

Louisiana,  R.  L.,  §  690;  L.  1888,  Ch.  36,  §  3. 

Massachusetts,™  (R.  L.,  Ch.  110,  §  62.  For  debts 
contracted  after  capital  stock  has  all 
been  paid  in.  Stockholders  when  suit 
brought  are  liable.  See  Art.  1,  Sec.  a.) 

Minnesota,™  Stat.,  §§  2796,  2600.  (Liability  for 
unpaid  balance  of  stock.  Additional 
liability  is  for  debts  after  transfer  only. 
See  Art.  1,  Sec.  e,  above.) 

Missouri,™ Constit.,  Art.  12,  §  9  ;  R.  S.,  §§  985, 1330. 

21  Allen  v.  Montgomery  R.R.,  11  Ala.  437;  National  Com.  Bk.  v.  Mc- 
Donnell, 92  Ala.  387. 

88  Middleton  Bk.  v.  Magill,  5  Conn.  28 ;  Russell  v.  Estabrook,  40  Atl. 
Rep.  905. 

23  Van  Demark  v.  Barons,  52  Kan.  779 ;  R.  I.,  etc.,  Co.  v.  Moulton,  82 
Fed.  Rep.  979. 

24  Boston  Music  Hall  Assoc'n  v.  Cory,  129  Mass.  435. 

25  Olson  v.  Cook,  57  Minn.  552 ;  Gunnison  v.  U.  S.  Investment  Co.,  70 
Minn.  292;  Spelman  v.  Mendenhall,  57  N.  W.  Rep.  468. 

86  Coquard  v.  Prendergast,  35  Mo.  App.  237. 


Stockholders'  Liability.  199 

Montana,  Civ.  Code,  §  470. 

New  Jersey?1  L.  1896,  Ch.  185,  §  21. 

North  Dakota,  Civ.  Code,  §  2902. 

Oklahoma,  Stat.,  §  963. 

Pennsylvania?*  Corporations,  §  68. 

South  Carolina,  Constit.,  Art.  9,  §  18. 

South  Dakota,  Ann.  Stat.,  §  3841. 

Texas,  R.  S.,  §§  671,  686. 

Utah,  R.  S.,  §§  330,  331. 

Vermont,™  Stat.,  §  3725. 

Washington,™  Constit.,  Art.  12,  §  4;  Code,  §  4266. 

Wyoming,  R.  S.,  §  3045. 

Sec.  c.    The  liability  of  the  transferee  and  holder  is  con- 
fined to  debts  contracted  after  transfer. 

This  rule  applies  in  all  states  cited  in  Article  1,  Sections 
d  and  e. 

Sec.  d.    The  transferee  and  holder  assumes  no  liability. 
See  Article  1,  Section  a. 

27  But  if  the  transferee  of  the  original  subscriber  transfers  his  stock 
he  does  not  thereby  obtain  immunity  from  payment  of  any  unpaid  bal- 
ance on  the  stock.     Hood  v.  McXaughton,  54  N.  J,  L.  425,  428. 

28  The  case  of  Messersmith  v.  Sharon  Bk ,  96  Pa.  St.  440,  held  that  the 
transferor  remains  liable  and  the  transferee  is  exempt.     But  the  later 
case  of  Bell's  Appeal,  115  Pa.  St.  88,  93,  seems  to  have  reversed  this  de- 
cision by  holding  that  the  liability  is  a  charge  upon  the  stock,  which 
passes  with  it  to  a  subsequent  holder. 

^Dauchy  v.  Brown,  24  Vt.  197;  Barton  Nat.  Bk.  v.  Atkins,  72  Vt.  33. 
30  Stewart  v,  P.  and  P.  Co.,  1  Wash.  521. 


200  Digest  of  Corporation  Laws. 


CHAPTER  IV. 

INTERCORPORATE   RELATIONS, 


TITLE  A.     CONSOLIDATION  OP   CORPORATIONS. 

By  consolidation  is  meant  the  union  of  the  stockholders' 
properties  and  franchises  of  two  or  more  corporations  into  a 
single  corporation.  This  may  take  place  either  through  the 
absorption  of  one  corporation  by  the  other,  or  by  the  dis- 
solution of  both  the  old  corporations  and  the  simultaneous 
creation  of  a  new  one.  The  former  process,  by  which  the 
identity  of  one  of  the  constituent  corporations  is  pre- 
served, is  also  termed  merger.  Consolidation  is  most  com- 
monly exemplified  by  railroad  corporations,  but  the  statutes 
of  many  states  also  provide  for  the  consolidation  of  business 
corporations.  Such  express  legislative  authority  is  neces- 
sary to  enable  corporations  to  divert  their  funds  from  a 
separate  to  a  joint  enterprise. 

The  plan  of  consolidation  must  be  first  agreed  upon 
between  the  directors  of  the  two  corporations,  and  then 
ratified  by  a  vote  of  the  stockholders  of  each  corporation  at 
a  meeting  called  for  the  purpose.  Sometimes  a  majority 
vote  is  sufficient,  but  a  vote  of  two-thirds  or  more  of  the 
stock  is  usually  required.  Some  of  the  statutes  also  pro- 
vide that  any  dissenting  stockholder  may  surrender  his 
stock  and  receive  its  value.31 

It  is  to  be  understood  that  the  right  of  consolidation  is  to 
be  exercised  within  the  statutory  prohibitions  of  combina- 
tions to  promote  monopoly  or  to  regulate  prices.  See 
Title  C. 

31  For  an  exhaustive  and  admirable  treatment  of  this  whole  subject 
the  reader  is  referred  to  Noyes'  Intercorporate  Relations. 


Consolidation  of  Corporations.  201 


ART.  1.    ANY  TWO  OR  MORE  CORPORATIONS  MAY  CONSOLIDATE. 

Colorado,  Stat.,  §  628.      (By  three-fourths  vote.) 

Delaware,  L.  1901,  Ch.  167,  §§  59,  60.  (By  two- 
thirds  vote.) 

Kentucky,  Stat.,  §§  555-558;  L.  1902,  Ch. '  &S~. 
(By  two-thirds  vote.  Stock  of  dissent- 
ing stockholders  to  be  purchased  at  its 
market  value.) 

Nevada,  Comp.  L.,  §  894,  13;  G.  S.  (1885), 
§§  1075,  1076.  (By  three-fourths 
vote.) 

Pennsylvania,  L.  1901,  p.  349.  (By  majority  vote. 
Stock  of  dissenting  stockholders  to  be 
purchased  at  appraised  value.) 

ART.  2.    CORPORATIONS  ORGANIZED   FOR  A  SIMILAR  PURPOSE  OR 
CARRYING  ON  A  SIMILAR  BUSINESS  MAY  CONSOLIDATE. 

Connecticut,  G.  S.,  §§  3386-3390.  (By  two-thirds 
vote.  Stock  of  dissenting  stockhold- 
ers to  be  purchased  at  its  value.) 

Illinois,  R.  S.,  Ch.  32,  §§  50,  52,  65.  (By  two- 
thirds  vote.  Not  more  than  two  cor- 
porations.) 

Louisiana,  R.  L.,  p.  151.      (By  three-fifths  vote.) 

Maryland,  G.  L.,  Art.  23,  §  39  ;  L.,  1892,  Ch.  666. 
(By  majority  vote.) 

New  Jersey,  L.  1896,  Ch.185,  §§  104-108;  L.  1902, 
Ch.  241.  (By  two-thirds  vote.  Stock 
of  dissenting  stockholders  to  be  pur- 
chased at  the  appraised  value.) 

New  York,  G.  L.,  Ch.  41,  §§  8-12.  (By  two- 
thirds  vote.  Stock  of  dissenting  stock- 
holders to  be  purchased  at  the  appraised 
value.) 

Utah,  L.  1901,  Ch.  26,  §  6.      (By  two-thirds  vote.) 


202  Digest  of  Corporation  Laws. 


ART.  3.    MINING  CORPORATIONS  MAY  CONSOLIDATE. 

California,  Civ.  Code,  §  361.      (If  holding  adjacent 

lands.     By  two-thirds  vote.) 

Michigan,  Comp.  L.,  §  7025.     (By  three-fifths  vote.} 
Montana,  Civ.   Code,  §   527.      (If  holding  adjacent 
lands.     By  three-fifths  vote.) 


ART.  4.    SIMILAR   MANUFACTURING   CORPORATIONS  MAY  CONSOLI- 
DATE. 

Missouri,  E.  S.,  §  1334.      (By  three-fifths  vote.) 


ART.   5.     MINING  OR  MANUFACTURING    CORPORATIONS  MAY  CON- 
SOLIDATE. 

Alabama,  Civ.  Code,  §§  1147-1150.  (By  majority 
vote.) 

Ohio,  Ann.  Stat.,  §§  3864,  3381,  3382.  (By  two- 
thirds  vote.) 

TITLE  B.     CORPORATE  STOCKHOLDING. 

As  consolidation  represents  the  characteristic  method  of 
railroad  combination,  stockholding  control  represents  the 
characteristic  method  of  industrial  combination.  A  single 
holding  corporation  by  the  purchase  of  a  majority  of  the 
stock  in  other  corporations  acquires  control  of  them  and 
unites  their  interest  in  a  common  policy.  This  process 
differs  from  consolidation  by  the  fact  that  the  subsidiary 
corporations  theoretically  retain  their  separate  and  distinct 
existence. 

In  order  to  effect  this  result,  the  holding  corporation 
must  have  power  to  purchase  the  stock  of  other  corpora- 
tions. On  the  principle  that  a  corporation  can  apply  its 
funds  only  to  the  objects  declared  in  its  charter,  it  cannot 
purchase  the  stock  of  other  corporations  without  express 
legislative  authority.32  Such  authority  is,  however,  granted 
by  statute  in  a  number  of  the  states. 

32  See  Noyes'  Intercorporate  Relations,  §  264  and  cases  cited. 


Corporate  Stockholding.  203 


ART.  1.    ANY  CORPORATION  MAY  OWN  THE  STOCK  OF  ANY  OTHER. 

CORPORATION. 

Connecticut,  L.  1895,  Ch.  138. 
Delaware,  L.  1901,  Ch.  167,  §  135. 
Maine,  L.  1901,  Ch.  229,  §  14. 
New  Jersey,  L.  1896,  Ch.  185,  §  51. 
Pennsylvania,  L.  1901,  Ch.  298. 

ART.  2.    CERTAIN  KINDS  OF  CORPORATIONS  MAY  OWN  THE  STOCK 
OF  ANY  CORPORATION. 

Indiana,  Ann.  Stat.,  §  5059.  (Manufacturing  and 
mining  corporations.  But,  except  for 
the  purchase  of  stock  in  a  water  com- 
pany, only  on  the  written  consent  of 
all  the  stockholders  of  both  corpora- 
tions.) 

Minnesota,  Stat.,  §  2834.  (Mining  corporations. 
If  a  majority  of  the  stockholders  so 
elect.) 

ART.  3.  A  CORPORATION  MAY  OWN  STOCK  IN  ANOTHER  CORPO- 
RATION, ENGAGED  IN  A  SIMILAR  BUSINESS,  OR  IN  A  BUSINESS- 
USEFUL  OR  SUBSIDIARY  TO  THE  FIRST  CORPORATION. 

Sec.  a.    Generally. 

New  York,  G.  L.,  Ch.  36,  §§  40,  58.  (Or  of  a  corpo- 
ration with  which  it  may  consolidate.) 

Wisconsin,  Stat.,  §  1775.  (In  the  case  of  lumber- 
ing corporations,  upon  the  assent  of 
the  holders  of  the  capital  stock  of 
both  corporations.) 

Wyoming,  R.  S.,  §  3040. 

Michigan,  Comp.  L.,  §  7012.  (In  the  case  of  min- 
ing corporations.  But  only  if  both 
corporations  conduct  their  business 
without  the  state. 

Ohio,  L.  1902,  p.  390.  (In  any  other  kindred  but 
not  competing  corporation,  domestic 
or  foreign.) 


201  Digest  of  Corporation  Laws. 


;Sec.  b.    May  own  stock  in  a  railroad  connecting  its  plant  or 
adjacent  thereto. 

Illinois,  R.  S.,  Ch.  32,  §  148.  (But  only  in  one 
railroad  connecting  the  same  points.) 

Tennessee,  Code,  §  2339.  (A  mining  corporation 
may  own  such  stock  if  authorized  by 
a  vote  of  three-fourths  of  the  stock- 
holders.) 

West  Virginia,  Code,  Ch.  52,  §  4.  (A  manufac- 
turing company  may  own  such  stock.) 

-Sec.  c.  A  mining  corporation  may  own  stock  in  a  corpora- 
tion constructing  a  tunnel  to  facilitate  the  working  of 
the  mine. 

Nevada,  Comp.  L.,  893. 

;Sec.  d.  Mining,  mechanical  or  manufacturing  corporations 
may  own  stock  in  any  corporation  for  generating  power 
and  light  to  facilitate  their  business. 

Wisconsin,  Stat.,  §  1775. 

:Sec.  e.    A  corporation  may  own  not  more  than  ten  per  cent 
of  stock  in  a  gas  company  in  the  same  town. 

Massachusetts,  R.  L.,  Ch.  110,  §  79. 


TITLE  C.    ANTI-TRUST  PROVISIONS. 

By  the  well  settled  principles  of  the  common  law,  agree- 
ments, pools,  trusts  or  combinations  between  persons  or 
corporations  which  tend  to  lessen  competition  in  trade,  to 
regulate  prices,  or  to  promote  monopoly  are  against  public 
policy,  unlawful  and  void.  The  courts,  therefore,  have 
ample  power,  without  the  aid  of  statute,  to  protect  the  pub- 
lic against  monopolies  which  are  clearly  injurious  to  the 
public  welfare. 

In  the  larger  number  of  states,  however,  the  common 
law  has  been  denned  and  in  some  cases  somewhat  extended 
by  statute.  Seventeen  states  have  articles  in  their  constitu- 
tions in  regard  to  the  same  matter.  Congress  has  also 


Anti-  Trust  Provisions.  205* 

dealt  with  illegal  trade  combinations  in  relation  to  inter- 
state commerce  in  the  Interstate  Commerce  Act  of  1887, 
and  the  anti-trust  acts  of  1890  and  1894. 

All  this  legislation  has  been  framed  with  the  same  pur- 
pose, and  the  statutes  will  be  found  to  resemble  each  other 
in  their  main  provisions.  There  are  differences  in  detail^  • 
and  some  statutes  are  more  stringent  than  others  in  their 
prohibitions  and  penalties,  but  it  has  not  been  thought 
necessary  here  to  set  out  these  distinctions.  All  the  state 
laws  on  this  subject  at  present  in  force  are  collected  in  the 
citations  below. 

The  anti-trust  statutes  in  some  states  make  an  arbitrary 
distinction  between  dealers  and  producers  by  declaring  that 
the  act  ' '  shall  not  apply  to  agricultural  products  or  live 
stock  while  in  the  hands  of  the  producer  or  raiser."  Such 
a  provision,  being  class  legislation,  makes  the  whole  law 
invalid  under  the  fourteenth  amendment  of  the  Federal  Con- 
stitution. Upon  this  principle  statutes  in  Illinois  and  Texas 
have  recently  been  declared  unconstitutional33  and  similar 
statutes  in  Georgia,  Indiana,  Louisiana,  Michigan  and 
Tennessee34  are  also  clearly  invalid. 

Alabama,  Code,  §§  5557-5559. 

Arkansas,  Art.  2,  §  19  ;  L.  1899,  Ch.  41. 

California,  L.  1893,  Ch.  19. 

Colorado,  Constit.,  Art.  15,  §  5.      (Railroads  only.^ 

Connecticut,  Constit.,  Art.  1,  §  1. 

Florida,  L.  1897,  Ch.  4534. 

Georgia,™  Constit.,  Art.  4,  §  2,  1"  4. 

Idaho,  Constit.,  Art.  11,  §  18. 

Illinois,™  R.  S.,  Ch.  38,  §§  269  a-j. 

Indiana,™  Ann.  Stat.,  §§  3312  m-u. 

33  Illinois,  L.  1893,  p.  182,  §  9  (R.  S.,  Ch.  38,  §§  269  k-269  t)  ;   cf, 
Connolly  v.  Union  Sewer  Pipe  Co.  184,  U.  S.  540. 

Texas,  L.  1895,  Ch.  83,  §  12  (R.  S.,  Art.  5320)  ;  cf.  State  v.  Shippers 
Compress,  etc ,  Co.,  67  S.  W.  Rep.  1049. 

34  Georgia,  L.  1896,  p.  69 ;  Indiana,  L.  1897,  Ch.  104,  §  4  (Ann.  Stat., 
§  3312  j)  ;  Louisiana,  L.  1892,  Ch.  90,  §  8  (R.  L.,  p.  205)  ;  Michigan,  L. 
1889,  Ch.  225,  §  6  (Comp.  L.,  §  11382);  Montana,  Code,  §  325;  North 
Carolina,  L.  1899,  Ch.  666,  §  6  ;  Tennessee,  L.  1897,  Ch.  94,  §  4. 

35  See  note  34.  36  See  note  33. 


206  Digest  of  Corporation  Laws. 

Iowa,  Code,  §§  5060-5067. 
Kansas,  G.  S.,  §§  2427-2446,  7864-7874. 
Kentucky,  Constit.,  §  198;   Stat.,  §§  3915-3921. 
Zowmana,35  Constit.,  Art.    190;  L.   1890,   Ch.   86; 

L.  1894,  Ch.  176. 

Maine,  L.  1889,  p.  235  ;  L.  1899,  Ch.  266. 
Maryland,  Decl.  of  Rights,  Art.  41. 
Massachusetts,  E.  L.,  Ch.  56,  §  1. 
Michigan,™  L.  1899,  Ch.  255. 
Minnesota,    Stat.,    §§    6955-6959,    7722,    7723;    L. 

1899,  Ch.  359;  L.  1901,  Ch.  194. 
Mississippi,   Constit.,  §  198;  Code,  §§  4437-4442; 

L.  1900,  Ch.  88. 

Missouri,  E.  S.,  §§  8965-8970,  8978-8981. 
Montana,™  Constit.,  Art.  15. 
Nebraska,  Coinp.  Stat.,  §§  5336-5343  j. 
New  Mexico,  Comp.  L.,  §§  1292-1294. 
.New  York,  G.  L.,  pp.  2903,4806-4808,  5051,  5052. 
North    Carolina,™  Constit.,  Art.  1,  §   31;  L.    1889, 

Ch.  374;  L.  1901,  Ch.  586. 

North    Dakota,     Constit.,    Art.    7,    §    146;    Code, 
§§  7480-7484;  L.  1897,  Ch.  141. 
Ohio,  Ann.  Stat,,  §§  4427  (l)-4427  (12). 
Oklahoma,  E.  S.,  Ch.  83  §§  1-5. 
.South    Carolina,     Constit.,    Art.    9,    §    13 ;     Code, 
§§     2845-2847;     L.     1902,    No. 
574. 
.South   Dakota,     Constit.,     Art.    17,    §    20;     Stat., 

§§  3388-3390. 
Tennessee,  Constit.,  Art.   1,  §   22;  Code,  §§  3185- 

3191,  6622. 
Texas,™  Constit.,  Art.   1,    §   26,  Art.   10,   §    5;  L. 

1899,  Ch.  146. 
Utah,  Constit.,  Art.    12,    §    20 ;  E.    S.,    §§    1752- 

1762. 

Washington,  Constit.,  Art.  12,  §  22. 
Wisconsin,  Stat.,  §§  1791  j-m. 
Wyoming,  Constit.,  Art.  1,  §  30. 

35  See  note  34.  »  See  note  33. 


PART  II.  — TAX  LAWS. 


CHAPTER    V. 

THE  GENERAL  PROPEETY  TAX  ON  RESIDENT 
DOMESTIC  CORPORATIONS. 


The  General  Property  Tax  is  based  on  the  principle  that 
all  property  in  the  state  should  contribute  to  the  state 
revenue  in  proportion  to  its  money  value  according  to  a  just 
and  equitable  form  of  assessment.  The  methods  of  valua- 
tion and  assessment  for  different  forms  of  property  may  vary 
so  long  as  substantial  uniformity  in  results  is  attained,  but 
in  some  form  or  other  the  property  is  reduced  to  its  equiva- 
lent in  money  and  is  assessed  ad  valorem.  On  this  principle 
the  assessment  of  corporate  property  is  designed  to  reach 
the  property  value  of  the  entire  business  plant  of  the  corpo- 
ration, either  by  taxing  the  same  as  a  unit  or  by  separate 
assessments  on  the  various  corporate  assets. 

This  chapter  deals  with  the  taxation  of  domestic  corpora- 
tions located  and  doing  business  in  the  respective  states. 
The  taxation  of  foreign  corporations  and  of  domestic  corpo- 
rations transacting  their  entire  business  outside  the  state  is 
considered  in  Chapter  VI. 

TITLE  A.    THE   TAX  ON   CORPORATE   REAL    ESTATE. 

All  the  real  estate  owned  by  corporations  is  separately 
taxed  where  it  is  situated,  in  the  same  manner  as  other  real 
estate.  This  tax  is  levied  in  all  the  states  and  territories. 
The  real  estate  of  corporations  is  taxed  for  both  state  and 
local  purposes  except  in  Connecticut:,  Massachusetts  arid 
Pennsylvania  where  it  is  taxed  for  local  purposes  only.  As 
the  taxation  of  real  estate  is  in  general  not  affected  by  the 


208  Digest  of  Corporation  Laws. 

fact  of  corporate  ownership  the  details  and  varieties  of 
assessment  and  valuation  in  the  various  states  properly  be- 
long to  the  general  revenue  law  and  do  not  fall  within  the 
scope  of  this  report. 

TITLE  B.  THE  TAX  ON  THE  SEPARATE  ITEMS  OF 
CORPORATE  PERSONAL  PROPERTY. 

ART.  1.  SUCH  TAX  IS  LEVIED  BOTH  ON  THE  TANGIBLE  AND  IN- 
TANGIBLE PERSONAL  PROPERTY  OF  THE  CORPORATION. 

The  goods  and  chattels,  wares,  merchandise,  stock  in  trade 
and  all  forms  of  tangible  personal  property,  together  with 
the  moneys,  credits,  investments  and  other  intangible 
personal  property  belonging  to  corporations,  are  separately 
assessed  according  to  prescribed  and  classified  schedules, 
in  the  same  manner  as  like  property  of  individuals.  In  the 
case  of  mercantile  and  manufacturing  corporations,  the  man- 
ufactures, merchandise,  machinery  and  other  property  used 
in  connection  with  their  business  are  usually  assessed  in  a 
lump  sum  as  capital  or  capital  stock,  on  the  basis  of  the 
average  amount  on  hand  or  in  stock  during  the  preceding 
year.  Any  other  property  owned  by  such  corporations  is 
separately  assessed  in  the  ordinary  way. 

Sec.  a.  Corporations  so  assessed  pay  no  additional  property 
tax  on  their  capital  stock  and  shareholders  are  exempt 
from  any  tax  on  their  shares. 

Arizona,  R.  S.,  §  3837. 

Connecticut,  G.  S.,  §§  2323,  2328,  2329.  (For  local 
purposes  only.) 

Florida,  L.  1895,  Ch.  4322,  §§  1,  3,  8. 

Georgia,  Pol.  Code,  §§  767,  833;  L.  1898,  p.  21, 
§  16,  1[33;  L.  1900,  p.  21,  §  8. 

Idaho,  Constit.,  Art.  7,  §  8  ;  Pol.  Code,  §  1347. 

Illinois,  R.  S.,  Ch.  120,  §  3.  (Purely  manufacturing, 
newspaper-publishing,  stock-breeding  and 
coal-mining  corporations  only.) 

Iowa,  Code,  §§  1319,  1323.  (Manufacturing  corpo- 
rations only.) 

Kansas,  G.  S.,  §§  7502,  7503,  7506.  (Manufactur- 
ing and  stock-yard  corporations  only.) 


The  Tax  on  Corporate  Personal  Property.  209 

Kentucky,1  Constit.,  §  174;  L.  1902,  Ch.  128,  Art. 

1,  §  2;  Art.  3,  §  9. 
Maine,  R.  S.,  Ch.  6,  §  28.      (Manufacturing,  mining 

and  smelting  corporations  only.) 
Michigan,  Comp.  L.,  §  7067.      (Manufacturing  cor- 
porations only.) 

Missouri*  R.  S.,  §§  9123,  9144,  9152. 
Montana,  Civ.  Code,  §§  3701,  3711,  3714. 
Nevada,  Constit.,  Art.  8,  §  2  ;  Comp.  L.,  §§   1082, 

1084. 
New  Jersey*  L.  1896,  Ch.  185,  §   110.      (For  local 

purposes  and  state  school  tax  only.) 
Ohio,  Ann.  Stat.,  §§  2731,  2744. 
Oregon,  Ann.  L.,  §§  2744,  2750;  L.  1901,  p.  153. 
Texas,  R.  S.,   §§   5063,  5067,  5076;  G.  L.   1897, 

Ch.  142. 

Utah,  Constit.,  Art.  13,  §  3  ;  R.  S.,  §§   2505,  2528. 
Virginia,  Code,    §§  491,  492;    L.   1890,   Ch.    244, 
§§8,   28;   L.   1898,  Chs.   75,  342;  L. 
1900,  Chs.  796,  906.      (The  capital  em- 
ployed by  a  mercantile  corporation  and 
taxed  under  the  occupation  tax  is  exempt.) 
Washington,  Constit.,  Art.  7,  §§  2,  3  ;  Code,  §  1676. 
West  Virginia,  Code,  Ch.  29,  §§  41,  64. 
Wisconsin,  Stat.,  §§  1033,  1034,  1036,  1038,  IF  9. 
Wyoming,  R.  S.,  §§  1763,  1779  ;  L.  1895,  Ch.  87. 

1  An  amendment  to  the  Constitution  has  been   proposed,  allowing 
cities  and  towns  to  tax  personal  property  tangible  and  intangible  based 
on  incomes,  licenses  and  franchises  instead  of  ad  valorem,  L.  1902,  Ch.  50. 

2  The  merchandise  of  merchants  and  the  raw  materials  and  finished 
products  and  machinery  of  manufacturers  constitute  a  separate  class  for 
the  purpose  of  taxation.    Cities  of  over  300,000  inhabitants  may  tax 
such  property  for  local  purposes  at  a  lower  rate  than  that  levied  on 
real  estate  or  other  property.    The  state,  instead  of  taxing  such  mer- 
chandise and  manufactures  as  property,  taxes  the  persons  or  corpora- 
tions owning  the  same  under  a  license  tax.    But  as  the  tax  is  based  on 
the  amount  of  property,  and  is  levied  at  the  property  rate,  it  is  in  fact, 
if  not  in  name,  a  property  tax.     Cities  may  also  levy  a  license  tax,  so- 
called,  on  merchants  and  manufacturers  on  the  basis  of  their  annual 
sales.    R.  S.,  §§  8486,  8540,  8542,  8566,  9396-9398.    See  also  note  32. 

3  This   provision   supersedes   the   earlier   enactment   (G.  L,  Taxes, 
§  75)  requiring  the  assessment  of  the  full  amount  of  capital  paid  in  and 


210  Digest  of  Corporation  Laws. 


Sec.  to.  The  ordinary  tangible  and  intangible  personalty  is  as- 
sessed to  the  corporation  and  other  intangible  values 
are  assessed  through  the  medium  of  a  stock  tax  on  the 
corporati6n  itself  or  its  shareholders. 

The  stock  tax  referred  to  is  separately  considered  below 
under  Title  C. 

The  citations  under  this  title  apply  in  the  main  to  all 
property  owners,  whether  individuals  or  corporations.  As 
the  additional  stock  tax  is  a  special  assessment  on  the  intan- 
gible values  of  corporations,  it  is  a  little  difficult  to  deter- 
mine, in  some  states,  whether  a  separate  assessment  is 
required  of  the  ordinary  intangible  assets  enumerated  below, 
or  whether  the  stock  tax  is  to  be  regarded  as  providing  for 
their  taxation  by  an  alternative  method.  As  the  value  of  the 
property  separately  assessed  is  usually  deducted  in  fixing 
the  taxable  value  of  the  capital  stock  (see  Title  C,  Art.  1), 
the  question  whether  the  intangible  personalty  is  assessed  as 
personal  property  or  as  capital  stock  is  mainly  formal.  It 
would  seem,  however,  on  a  reasonable  construction  of  the 
statutes  that  a  separate  assessment  of  the  intangible  person- 
alty is  required  in  the  states  named. 

Alabama,  Civ.  Code,  §  3911;  L.  1901,  §  6. 
California,  Pol.  Code,  §§  3607,  3608,  3617. 
Delaware,*  L.  1898,  Ch.  25.      (Investments  only.) 
Indian  Territory,  Stat.,  §§  4900,  4901,  4960. 
Kansas,  G.  S.,  §§  7502,  7503,  7506.     (Except  man- 
ufacturing and  stock-yard  corpora- 
tions.) 

Louisiana,  L.  1898,  No.  170,  §§  7,  17,  28.  (The 
intangible  property  only  is  sepa- 
rately assessed.) 

Michigan,  Comp.  L.,  §§  3834,  3842. 
Minnesota,  Stat.,  §  1530. 

accumulated  surplus.    Jersey  City  Gas  Light  Co.  v.  Jersey  City,  46  N.  J. 
Law  194. 

4  The  tangible  property  of  mercantile  and  manufacturing  corporations 
is  taxed  under  a  license  tax  in  lieu  of  the  general  property  tax.  See 
below,  Chap.  VII.,  Title  C,  Art.  1. 


The  Tax  on  Corporate  Personal  Property.  211 

Mississippi,  Constit.,  §§    181,  182;   Code,  §§   3750, 

3755,  3757. 

Nebraska,  Comp.  Stat.,  §§  4282,  4313. 
New  Hampshire,  P.  S.,  Ch,  55,  §  7  ;  Ch.  56,  §  9. 
North  Dakota,  ~L.  1897,  Ch.  126,  §§  1,  4,  6,  7,  15,35. 
Oklahoma,  Stat.,  §§  5580,  5584;  L.  1897,  p.  217. 
Rhode  Island,  G.  L.,  Ch.  44,  §  1 ;  Ch.  46,  §  6. 
South  Carolina,  Civ.  Code,  §§  304,  306. 
xSW/i  Dakota,  Constit.,  Art.   11,   §   2;  Ann.  Stat., 

§§  2139,  2154. 
Vermont,  Stat.,  §§  374,  398,  402,  406,  411. 

Sec.  c.    The  intangible  property  so  taxed,  expressly  includes 
certain  enumerated  items. 

Where  the  tax  in  any  of  the  states  is  restricted  to  manu- 
facturing or  other  specified  corporations  as  stated  above, 
this  title  must  be  understood  to  refer  to  such  corporations 
only. 

In  addition  to  the  citations  which  follow  there  are  statutes 
in  other  states  providing  for  the  assessment  of  these  various 
forms  of  intangible  personalty  to  individuals  but  not  to 
corporations. 

Par.  1.    Money  on  hand  or  deposit. 

Alabama,  Civ.  Code,  §  3911. 

California,  Pol.  Code,  §  3617. 

Connecticut,  G.  S.,  §  2323. 

Florida,  L.  1898,  Ch.  4322,  §§  1,  3,  5. 

Georgia,  L.  1900,  p.  21,  §  8. 

Idaho,  Pol.  Code,  §  1347. 

Illinois,  E.  S.,  Ch.  120,  §  1. 

Iowa,  Code,  §§  1308,  1310. 

Kansas,  G.  S.,  §  7506. 

Kentucky,  L.  1902,  Ch.  128,  Art.  2,  §  16. 

Louisiana,  L.  1898,  No.  170,  §§  1,  91. 

Michigan,  Comp.  L.,  §  3831,  If  1. 

Mississippi,  Code,  §  3751. 

Missouri,  E.  S.,  §  9123. 

Montana,  Constit.,  Art.  12,  §  17. 


212  Digest  of  Corporation  Laws. 

Nebraska,  Com  p.  Stat.,  §  4282. 

Nevada,  Comp.  L.,  §  1082. 

New  Hampshire,  P.  S.,  Ch.  55,  §  7. 

New  Jersey,  G.  SM  Taxes,  §  64. 

North  Dakota,  L.  1897,  Ch.  126,  §  4. 

OM>,  Ann.  Stat.,  §  2731. 

Oregon,  Ann.  L.,  §  2731. 

Rhode  Island,  G.  L.,  Ch.  45,  §  10. 

South  Carolina,  Code,  §  260. 

South  Dakota,  Constit.,  Art.   11,  §   4;  Ann.   Stat., 

§§  2134,  2137,  2139. 
Texas,  R.  S.,  §  5063. 

C/taA,  Constit.,  Art.  13,  §  2  ;  R.  S.,  §§  2517,  2518. 
Vermont,  Stat.,  §§  399,  400.      (In  excess  of  $1,500, 

which  sum  is  exempt.) 
Virginia,   L.    1890,   Ch.   244,   §   8 ;   L.   1898,  Chs. 

75,  342;  L.  1900,  Ch.  906. 
Washington,  Code,  §  1657. 
West  Virginia,  Code,  Ch.  29,  §  46. 
Wisconsin,  Stat.,  §  1036. 
Wyoming,  R.  S.,  §  1763. 

Par.  2.    The  gross  amount  and  value  of  credits. 

Credits  are  usually  defined  as  claims  or  demands,  written 
or  unwritten  —  upon  note,  book  account  or  otherwise  —  for 
money,  property,  labor  or  other  valuable  thing  owing  to  any 
person  or  corporation.  In  some  states  the  term  is  restricted 
to  unsecured  debts.  In  other  states  the  term  includes  mort- 
gages and  other  securities.  In  the  following  states  such 
credits  are  assessed  at  their  full  value,  without  any  deduction 
for  the  debts  owed  by  the  person  assessed. 

Alabama,  Civ.  Code,  §  3911. 

Florida,  L.  1898,  Ch.  4322,  §§  1,  3,  5. 

Georgia,  L.  1900,  p.  21,  §  8. 

Kentucky,  L.  1902,  Ch.  128,  Art.  2,  §  16. 

Louisiana,  L.  1898,  No.  170,  §§  1,  91. 

Mississippi,  Code,  §  3751. 


The  Tax  on  Corporate  Personal  Property.  213 

Missouri,  R.  S.,  §§  9123,  9144. 

Oklahoma,  Stat.,  §  5596. 

Oregon,  Ann.  L.,  §  2731;  L.  1893,  p.  6. 

Par.  3.    The  net  amount  and  value  of  credits. 

From  the  total  amount  of  his  credits  the  person  assessed 
may  deduct  the  amount  of  his  bona  fide  indebtedness.  There 
are  various  rules  and  restrictions  in  the  several  states  in 
regard  to  such  deductions.  Some  states  require  the  tax- 
payer to  return  an  itemized  list  of  the  debts  for  which  he 
claims  a  deduction.  In  many  states'  also  there  are  certain 
debts  for  which  no  deduction  will  be  allowed.  Among  these 
are  obligations  to  mutual  insurance  companies,  unpaid  sub- 
scriptions to  the  capital  stock  of  any  corporation,  and  ac- 
knowledgments of  indebtedness  made  for  the  purpose  of 
avoiding  taxation.  It  is  sometimes  provided  also  that  de- 
ductions will  be  allowed  only  for  debts  due  to  a  resident  of 
the  state  and  taxable  to  the  latter  as  credits.  In  almost  all 
the  states  the  indebtedness  must  be  for  a  good  and  valuable 
consideration  actually  received,  and  the  person  assessed  must 
be  liable  as  principal,  not  as  surety  endorser  or  guarantor. 
It  is  frequently  provided  also  that  the  indebtedness  may  be 
deducted  from  credits  only,  and  not  from  the  total  personal 
estate.  These  differences  of  detail  are  too  numerous  for 
tabulation,  but  the  practice  in  each  state  may  be  learned 
from  the  citations. 

Arizona,  R.  S.,  §  3835. 

California,  Pol.  Code,  §§  3617,  3629. 

Connecticut,  G.  S.,  §§  2323,  2349. 

Idaho,  Pol.  Code,  §  1347. 

Illinois,  R.  S.,  Ch.  120,  §§  1,  27. 

Iowa,  Code,  §§  1309,  1310,  1311. 

Kansas,  G.  S.,  §  7508. 

Michigan,  Comp.  L.,  §§  3831,  3842. 

Montana,  Civ.  Code,  §  3701. 

Nebraska,  Comp.  Stat.,  §§  4282,  4308, 

Nevada,  Comp.  L.,  §  1082. 

New  Hampshire,  Ch.  55,  §  7,  H"  4. 


214  Digest  of  Corporation  Laws. 

New  Jersey,  G.  S.,  Taxes,  §§  64,  80. 

North  Dakota,  L.  1897,  Ch.  126,  §§  1,  4,  6,  7,  15. 

Ohio,  Ann.  Stat.,  §§  2730,  2731. 

Rhode  Island,  G.  L.,  Ch.  45,  §  10. 

South  Carolina,  Code,  §§  260,  265. 

South  Dakota,  Constit.,  Art.  11,  §  4;  Ann.  Stat., 
§  2135. 

Texas,  R.  S.,  §  5063. 

Utah,  R.  S.,  §§  2517,  2518. 

Vermont,  Stat.,  §§  399,  400.  (Subject  to  local  tax- 
ation, unless  already  taxed  by  the  state.) 

Virginia,  L.  1890,  Ch.  244,  §  8  ;  L.  1898,  Chs.  75, 
342 ;  L.  1900,  Ch.  906. 

Washington,  Code,  §  1657. 

West  Virginia,  Code,  Ch.  29,  §§  49,  50,  52. 

Wisconsin,  Stat.,  §§  1036,  1038,  1"  10. 

Wyoming,  R.  S.,  §§  1763,  1776. 

Par.  4.    Mortgages. 

Where  the  mortgage  is  assessed  to  the  holder  the  mort- 
gagor is  usually  taxed  on  the  equity  only.  But  some  states, 
like  Iowa  and  Utah,  in  addition  to  taxing  the  mortgage  to 
the  holder  as  personal  property,  also  tax  the  mortgaged 
property  at  its  full  value.  This  has  been  declared  by  the 
courts  not  to  be  double  taxation.5  Similarly,  foreign  mort- 
gages may  be  taxable  against  the  holder,  though  the  bor- 
rower may  pay  taxes  on  the  mortgaged  property  where 
situated.6  As  a  rule,  however,  the  taxation  of  mortgages 
is  little  more  than  a  matter  of  form.  When  such  a  tax  exists, 
the  customary  form  of  mortgage  usually  contains  a  provision 
that  the  mortgagor  shall  assume  and  pay  all  taxes.  But  in 
California,  Delaware  and  Maryland7  any  such  agreement 
between  mortgagor  and  mortgagee  is  declared  void.  In 
Maryland  there  is  a  specific  tax  of  eight  per  cent,  of  the 
gross  amount  of  interest  contracted  to  be  paid.  Arizona, 

6  Judge  v.  Spencer,  15  Utah,  242  ;  Cook  v.  Burlington,  59  Iowa,  251. 

6  Kirtland  v.  Hotchkiss,  100  U.  S.  491. 

7  California,  Constit.,  Art.  13,  §  5;  Delaware,  L.  1898,  Ch.  25,  §  10; 
Maryland,  P.  G.  L.,  Ch.  81,  §  146  A-F ;  L.  1896,  Ch.  120;  L.  1902,  Ch. 
26. 

8  P.  G.  L.,  Ch.  81,  §  146  A. 


The  Tax  on  Corporate  Personal  Property.  215 

Colorado,  Oklahoma,  Oregon,  Rhode  Island,  South  Dakota, 
Vermont  and  Washington 9  provide  that  the  mortgaged 
property  shall  be  assessed  at  its  full  value  without  regard 
to  the  mortgage,  and  the  mortgage  itself  is  relieved  from 
taxation. 

In  the  states  enumerated  in  section  (c)  above  which  allow 
the  tax-payer's  indebtedness  to  be  deducted  from  his  credits, 
mortgage  investments,  as  a  rule,  may  be  included  with  credits 
for  the  purpose  of  such  deduction.  But  in  Kansas  the  law 
is  otherwise.10 

California,  Pol.  Code,  §  3617.  (Taxed  as  an  inter- 
est in  land,  not  as  personal  prop- 
erty.) 

Connecticut,11  G.  S.,  §§  2323,  2325. 

Delaware™  L.  1898,  Ch.  25,  §  2. 

Florida,  L.  1898,  Ch.  4322,  §  16,  If  6. 

Georgia,  L.  1900,  p.  21,  §  8. 

Idaho,  Pol.  Code,  §  1347. 

Illinois,  R.  S.,  Ch.  120,  §  21. 

Iowa,  Code,  §§  1309,  1311. 

Kansas,  G.  S.,  §  7503. 

Kentucky,  L.  1902,  Ch.  128,  Art.  2,  §  16. 

Massachusetts,  R.  L.,  Ch.  12,  §  16.  (Taxed  as  an 
interest  in  land,  not  as  personal 
property.) 

Michigan,  Comp.  L.,  §§  3831,  3842. 

Missouri,  R.  S.,  §§  9123,  9144. 

Montana,  Civ.  Code,  §  3701. 

Nevada,  Comp.  L.,  §  1082. 

New  Hampshire,  P.  S.,  Ch.  55,  §  7. 

9  Arizona,  R.  S.,  §  3847;  Colorado,  L.  1901,  Ch.  94,  §  14;  Oklahoma, 
Stat.,  §  5591 ;  Oregon,  Ann.  L.,  §  2751 ;  Rhode  Island,  G.  L.,  Ch.  45,  §  6  ; 
South  Dakota,  Ann.  Stat ,  §  2135  ;  Vermont,  Stat.,  §§  368,  369  ;  Washing- 
ton, Code,  §  1657. 

10  Lappin  v.  Commrs.  Nemaha  Co.,  6  Kan.  403. 

11  Any  note,  bond,  taxable  mortgage  or  other  chose  in  action,  on  pres- 
entation  of  the  same  to  the  state  treasurer  and  payment  of  a  tax 
thereon  at  the  rate  of  f  per  cent,  per  year,  will  be  endorsed  as  exempt 
from  taxation  during  the  period  for  which  such  tax  has  been  paid. 

12  Where  the  mortgagee  is  a  non-resident  the  mortgagor  must  pay  the 
tax  and  deduct  the  same  from  the  interest  accruing  on  the  mortgage.    §  7. 


216  Digest  of  Corporation  Laws. 

New  Jersey,  G.  S.,  Taxes,  §§  64,  80. 

North  Dakota,  L.  1897,  Ch.  126,  §§  1,  4. 

Texas,  R.  S.,  §  5064. 

Utah,  R.  S.,  §§  2517,  2518. 

West  Virginia,  Code,  Ch.  29,  §§  46,  47. 

Wisconsin,  Stat.,  §§  1036,  1038,  f  10. 

Wyoming,  R.  S.,  §  1763. 

Par.  5.    Investments  in  public  bonds  or  bonds  of  private  corpora- 
tions. 

As  a  rule  United  States  bonds  are  expressly  exempt  under 
the  state  law.  But  such  a  provision  is  unnecessary,  as  the 
states  have  no  constitutional  power  to  tax  United  States 
securities.13  It  has  been  held,  however,  that  if  a  corporation 
invests  its  surplus  in  United  States  bonds  or  other  non- 
taxable  securities  for  the  purpose  of  evading  taxation,  they 
may  be  counted  in  determining  the  amount  of  the  assets.14 
The  bonds  of  the  taxing  state  and  its  municipalities  are  also 
frequently  exempt  from  taxation.15 

Alabama,  Civ.  Code,  §  3911. 
California,  Pol.  Code,  §  3617. 
Connecticut,  G.  S.,  §§  2323,  2325. 
Delaware,™  L.  1898,  Ch.  25,  §  2. 
Florida,  L.  1898,  Ch.  4322,  §  3. 
Georgia,  L.  1900,  p.  21,  §  8. 
Idaho,  Code,  §  1313. 
Illinois,  R.  S.,  Ch.  120,  §  1. 
Iowa,  Code,  §§  1308,  1310. 
Kansas,  G.  S.,  §  7503. 
Kentucky,  L.  1902,  Ch.  128,  Art,  2,  §  16. 
Louisiana,  L.  1898,  No.  170,  §§  1,  91. 
Maine,  R.  S.,  Ch.  6,  §  5. 
Michigan,  Comp.  L.,  §  3842. 
Mississippi,  Code,  §  3751. 
Missouri,  R.  S.,  §  9123. 

13  U.  S.  Stat.,  §  3701. 

14  City  of  New  Orleans  v.  New  Orleans  Canal,  etc.,  Co.,  29  La.  Ann.  851. 
l§  Cf.  Alabama  Civ.  Code,  §  3911 ;  New  Jersey,  G.  L.,  Taxes,  §  200 

16  Every  debtor  on  a  bond  held  by  a  non-resident  creditor  must  pay 
the  tax  and  deduct  the  same  from  the  interest.     Ibid.,  §  7. 


The  Tax  on  Corporate  Personal  Property.  217 

Montana,  Civ.  Code,  §  3701. 

Nebraska,  Comp.  Stat.,  §  4282. 

New  Hampshire,  P.  S.,  Ch.  55,  §  7. 

New  Jersey r,  G.  S.,  Taxes,  §  64. 

JVbrtA  Da&oto,  L.  1897,  Ch.  126,  §§  1,  4. 

Ohio,  Ann.  Stat.,  §  2731. 

Rhode  Island,  G.  L.,  Ch.  45,  §  10. 

tfottf/4  Carolina,  R.  S.,  §  28,  fl  15,  16. 

South  Dakota,  Constit.,  Art.  11,  §  4. 

Texas,  R.  S.,  §§  5063,  5084,  IF  40. 

ETtoA,  R.  S.,  §§  2517,  2518. 

Vermont,  Stat.,  §§  399,  400.      (Locally  taxed  unless 

taxed  by  the  state.) 

Virginia,  L.  1890,  Ch.  244,  §  8  ;  L.  1898,  Chs.  75, 
342  ;  L.  1900,  Ch.  906.  (Unless  part 
of  the  capital  of  a  merchant  or  manufac- 
turer, or  of  a  business  done  outside  the 
state.) 

Washington,  Code,  §  1657. 
West  Virginia,  Code,  Ch.  29,  §§  46,  47. 
Wisconsin,  Stat.,  §§  1036,  1050,  f  11. 
Wyoming,  R.  S.,  §  1763. 

Par.  6.    Investments  in  the  stock  of  other  corporations. 

In  so  far  as  a  corporation  is  authorized  to  own  the  stock 
of  other  corporations,  it  is  taxable  on  such  stock  in  the  same 
manner  as  individuals.  The  states  taxing  the  capital  stock 
or  corporate  excess  of  domestic  or  foreign  corporations  in 
the  hands  of  individual  shareholders  are  enumerated  below. 
(See  Title  C,  and  Chapter  VI.)  As  such  provisions  apply 
equally  to  corporations  investing  in  such  stock,  it  is  un- 
necessary to  make  a  separate  classification  under  the  heading 
of  investments.  But  where  the  corporation  holding  such 
investments  is  taxed  on  its  capital  stock  in  lieu  of  any 
separate  assessment  of  its  intangible  personalty,  it  is  taxed 
on  such  holdings  only  in  so  far  as  they  add  to  the  market 
value  of  its  own  shares. 

Par.  7.   Franchises. 

Among  the  taxable  items  of  personal  property  several  of 
the  states  include  franchises.  The  term  is  loosely  used  to 


218  Digest  of  Corporation  Laws. 

mean  either  the  corporate  franchise  incident  to  all  corpora- 
tions, or  the  special  franchises  for  the  use  of  public  streets 
enjoyed  by  railways,  gas  and  electric  illuminating  companies, 
telegraph  and  telephone  companies  and  other  public-service 
corporations.  So  far  as  the  franchises  of  ordinary  business 
corporations  are  concerned,  a  special  method  for  their  tax- 
ation is  provided  by  the  tax  on  capital  stock  or  shares  or  by 
the  franchise  tax.  These  forms  of  taxation  are  separately 
considered  below.  (See  pages  222,  274.)  So  far  as  the  tax  on 
franchises  applies  to  the  special  franchises  of  public-service 
corporations,  it  does  riot  fall  within  the  scope  of  this  report. 

ART.  2.  THE  TANGIBLE  PERSONAL  PROPERTY  ONLY  IS  ASSESSED 
UNDER  THIS  FORM  OF  TAX.  ALL  THE  INTANGIBLE  PROPERTY 
AND  VALUES  OF  THE  CORPORATION  ARE  ASSESSED  THROUGH 
THE  MEDIUM  OF  A  TAX  ON  THE  CAPITAL  STOCK  OR  SHARES. 

Arkansas,  Stat.,  §§  6401,  6462. 

Illinois,  R.  S.,  Ch.  120,  §  3,  If  4.  (Except  purely 
manufacturing,  newspaper-publish- 
ing, stock-breeding  and  coal-min- 
ing corporations  which  are  taxed 
on  all  their  property  in  the  same 
manner  as  individuals.) 

Indiana,  Ann.  Stat.,  §§  8422,  8491. 

Indian  Territory,  Stat.,  §§  4900,  4960. 

Maine,  R.  S.,  Ch.  6,  §  14,  H  3,  28.  (Machinery 
used  in  manufacturing,  goods  manu- 
factured or  unmanufactured,  and 
all  stock  in  factories.) 

Massachusetts,  R.  L.,  Ch.  14,  §§  37,  38.  (A  local 
tax  on  machinery  only.) 

Minnesota,11  Stat.,  §  1530,  1  7. 

17  According  to  the  former  practice,  apparently  approved  by  the  Su- 
preme Court,  Section  1524  (providing  for  the  taxation  of  property  both 
tangible  and  intangible  according  to  an  itemized  list)  applied  to  corpo- 
rations as  well  as  to  individuals,  but  it  is  now  settled  that  Section  1530 
only  applies.  Under  this  section  the  corporation  is  required  to  return 
for  taxation  "  the  value  of  its  personal  property."  This  is  held  to  apply 
to  tangible  property  only,  as  the  intangible  property  and  franchise  are 
reached  by  the  taxation  of  the  corporate  excess,  and  double  taxation 
should,  if  possible,  be  avoided.  State  v.  Duluth  Gas  and  Water  Com- 
pany, 76  Minn.  96. 


The  Tax  on  Corporate  Personal  Property.  219 

North  Carolina,  L.  1901,  Ch.  9,  §  6. 
Tennessee,  L.  1901,  Ch.  174,  §§  22,  23,  27. 


ART.  3.  THE  CORPORATE  PLANT  OR  ENTERPRISE  IS  VALUED  AS 
A  WHOLE,  ON  THE  BASIS  OF  THE  MONEY  AND  PROPERTY 
INVESTED,  THE  ASSESSED  VALUE  OF  THE  REAL  ESTATE 
IS  DEDUCTED,  AND  THE  REMAINDER  IS  TAXED  IN  A  LUMP 
SUM  AS  THE  CAPITAL  OF  THE  CORPORATION. 

New  York,18  G.  L.,  Ch.  24,  §§  12,  31.  (Surplus 
profits  or  reserve  funds  exceeding  ten 
per  cent,  of  the  capital  are  included.) 


ART.  4.  CORPORATIONS  ARE  NOT  SEPARATELY  TAXED  ON  THEIR 
PERSONAL  PROPERTY,  BUT  ALL  THEIR  TANGIBLE  AND  IN- 
TANGIBLE PERSONALTY  IS  ASSESSED  BY  A  TAX  ON  THE 
CAPITAL  STOCK  OR  SHARES. 

Colorado™  L.  1902,  Ch.  3,  §  60. 

District  of  Columbia,  U.  S.  Stat.  1902,  Ch.  1352, 
§  6,  Tf  8.  (Except  newspaper, 
real-estate,  and  mercantile  corpora- 
tions, which  are  assessed  on  their 
average  stock  in  trade,  like  indi- 
viduals.) 

18  By  the  words  of  the  statute  this  is  a  tax  on  the  capital  stock,  and  the 
machinery  of  the  capital  stock  tax  has  been  adopted  by  first  valuing  the 
corporate  plant  as  a  whole  and  then  deducting  the  value  of  the  property 
separately  assessed.     (See  below,  Title  C.)     But  as  the  share  value  is, 
in  legal  theory  at  least,  disregarded  in  making  the  valuation,  the  tax 
seems  to  be  rather  a  tax  on  the  personal  property  of  the  corporation 
than  on  its  capital  stock  as  these  terms  are  used  and  defined  in  this 
chapter.     See  People  ex  rel.  U.  T.  Co.  v.  Coleman,  126  N.  Y.  433. 

19  A  special  session  of  the  Legislature  was  convened  this  year  toreenact 
a  revenue  law,  as  the  Revenue  Act  of  1901  was  held  unconstitutional  by 
the  U.  S.  Circuit  Court  on  the  ground  that  the  Legislature  had  no  power 
to  create  certain  county  assessors  a  State  Board  of  Assessors  for  the 
equalization  of  taxes  throughout  the  state  on  railroad,  telephone  and 
telegraph  companies.     Union  Pac.  R.  Co.  v.  Alexander,  113  Fed.  Rep. 
347 ;   S.  C.  115  Fed.  Rep.  1017.    See  also  People  ex  rel.  Alexander  v. 
District  Court,  68  Pac.  Rep.  232,  and  the  preamble  to  chapter  2  of  1902 
Laws.    The  present  law  provides  that  if  any  method  of  taxation  thereby 
prescribed  should  be  held  unconstitutional,  the  county  assessors  may 
assess  the  property  at  its  full  cash  value.    Ibid.,  §  238. 


220  Digest  of  Corporation  Laws. 

Iowa,  Code,  §  1323.  (Except  manufacturing  cor- 
porations.) 

Maryland,  P.  G.  L.,  Ch.  81,  §§  2,  4. 

New  Mexico,  Comp.  L.,  §§  4024,  4028.  (See  note 
35.) 

Pennsylvania,  Dig.  L.,  Taxation,  §  2. 

ART.  5.  THE  TAXATION  OF  PERSONAL  PROPERTY  OUTSIDE  THE 
STATE  OWNED  BY  RESIDENT  INDIVIDUALS  OR  CORPORA- 
TIONS. 

In  many  of  the  states  there  is  no  special  exemption  of 
such  property,  but  on  ordinary  legal  principles  it  cannot  be 
taxed  unless  it  has  its  situs  in  the  taxing  state  and  is  thus 
brought  within  its  jurisdiction.  If  the  common  law  rule 
that  personalty  follows  the  owner  (mob ilia  personam  sequun- 
tur)  be  strictly  adhered  to,  all  personal  property,  irrespec- 
tive of  its  location,  may  be  taxed  where  the  owner  resides. 
But  this  rule  has  been  judicially  declared  to  be  "  a  fiction 
which  has  no  application  to  questions  of  revenue,"20  and 
most  of  the  states  have  broken  away  from  it.  The  question 
of  situs  is  now  generally  determined  by  the  actual  physical 
location  of  the  property.  Intangible  property  which  strictly 
has  no  physical  location  apart  from  its  owner  is  still  gen- 
erally taxed  at  the  owner's  domicile.  This  view  of  the  law 
is  reflected  in  most  of  the  states  where  the  taxation  of  per- 
sonal property  outside  the  state  has  been  covered  by  express 
enactment. 

Sec.  a.    The   personal    property  located  outside  the    state 
and  taxed  there  is  expressly  exempt. 

Maine,  R.  S.,  Ch.  6,  §  14,  IF  10. 
Vermont,  Stat.,  §  362,  1  4. 

Sec.  b.  The  money  invested  in  merchandising  and  manu- 
facturing outside  the  state  and  taxed  there  is 
expressly  exempt. 

Connecticut,  G.  S.,  §  2323.  (The  fact  that  such 
property  is  fully  taxed  elsewhere  must 
be  satisfactorily  shown.) 

20  Alvany  v.  Powell,  2  Jones  Eq.  (N.  C.)  56. 


The  Tax  on  Personalty   Outside  the  State.  221 


Sec.  c.    The  tangible   personalty   located  in   another   state 
and  taxed  there  is  expressly  exempt. 

Rhode  Island,  G.  L.,  Ch.  45,  §  9. 
West  Virginia,  Code,  Ch.  29,  §  48. 

Sec.    d.     Investments    (including    bonds,    mortgages,    etc.) 
taxed  in  another  state  are  expressly  exempt. 

Delaware,  L.  1898,  Ch.  25,  §  3. 

Sec.  e.    Property  actually  and  permanently  invested  in  busi- 
ness in  another  state  is  expressly  exempt. 

Indiana,  Ann.  Stat.,  §  8411. 
Michigan,  Comp.  L.,  §  3831,  T  5. 

Sec.  f.    The  taxable  property  outside  the  state  is  specified, 
and  by  inference  all  other  is  exempt. 

Par.  1.   Intangible  property  in  another  state  may  be  taxed. 

Arkansas,  §  6402. 

New  Jersey,  G.  L.,  Taxes,  §  64.21 

Ohio,  Ann.  Stat.,  §  2731. 

Virginia,  Code,  §  492. 

Par.  2.    Property  temporarily  out  of  the  state,  or  sent  out  of  the 
state  for  sale  and  not  sold,  may  be  taxed. 

South  Carolina,  Code,  §  260. 

Sec.  g.    The  tangible  property  located  in  another  state  is 
exempt  by  judicial  decision23  in  the  following  states. 

Alabama.  Louisiana. 

California.  Missouri. 

Georgia.  North  Carolina. 

Iowa.  Tennessee. 

Kansas.  Wisconsin. 

21  See  State  v.  Rahway,  24  N.  J.  L.  56. 

22  Varner  v.  Calhoun,  48  Ala.  178  ;  San  Francisco  v.  Flood,  64  Cal.  504 ; 
Collins  v.  Miller,  43  Ga.  336 ;   Rhyno  v.  Madison  Co.,  43  Iowa,  632 ; 
Fisher  v.  Commrs.,  19  Kan.  414 ;  Meyer  v.  Pleasant,  41  La.  Ann.  645 ; 
State  v.  St.  Lo.  Co.  Ct,  47  Mo.  594 ;   Alvany  v.  Powell,  2  Jones  Eq. 
(N.  C.)  51 ;  Bedford  v.  Mayor,  7  Heisk.  (Tenn.)  409 ;  State  v.  Gaylord, 
73  Wis.  316. 


222  Digest  of  Corporation  Laws. 


TITLE  C.  THE  TAX  ON  THE  CORPORATE  PROPERTY 
AS  REPRESENTED  BY  THE  CAPITAL  STOCK  OR 
SHARES. 

"  Capital  stock"  is  used  in  this  title,  in  the  special  sense 
in  which  that  term  is  applied  to  corporations,  to  signify  the 
intangible  aggregate  which  is  divided  into  shares  and  issued 
to  the  individual  stockholders.  The  capital  stock  is  the 
whole,  of  which  the  individual  shares  are  the  fractional 
parts,  and  its  value  must  be  the  aggregate  value  of  the 
shares. 

The  capital  stock  is  thus  nothing  concrete,  but  is  merely 
the  symbol  of  the  corporate  property  and  assets,  which  alone 
give  it  substance  and  value.  Strictly  speaking,  the  capital 
stock  is  not  so  much  a  subject  of  taxation  as  a  measure  of 
value.  The  tax  is  levied  on  the  corporate  property,  but  the 
capital  stock  is  regarded  as  a  business  photograph  of  the 
corporate  possessions  and  possibilities,  and  is  adopted  as  a 
convenient  criterion  of  the  value  of  the  total  corporate  assets. 

The  term  capital  stock  is  also  used  in  several  of  the  states, 
where  an  exact  usage  would  require  the  term  capital,  to 
mean  the  tangible  stock  in  trade  and  other  assets  of  the 
business  enterprise.  As  thus  used,  the  term  has  no  pecu- 
liar application  to  corporations,  but  can  be  applied  equally 
to  similar  property  of  business  firms  or  individuals. 

The  term  capital  stock  is  also  used  in  some  states  in  a 
middle  sense.  The  present  share  value  is  not  considered, 
but  the  amount  of  stock  originally  subscribed  and  paid  in, 
as  well  as  the  tangible  property  into  which  it  is  converted, 
is  taken  into  account  in  fixing  the  valuation.23 

Where  the  term  capital  stock  is  used  in  either  of  the  latter 
two  senses  it  represents  a  tax  on  the  personal  property  of 
corporations  which  is  substantially  the  same  in  its  method 
of  assessment  as  the  tax  on  the  personal  property  of  indi- 
viduals. The  states  which  prescribe  a  tax  on  the  capital 
stock  in  this  general  sense  are  therefore  classified  under  the 

23  For  example,  in  Virginia,  where  capital  stock  is  held  to  mean  "  the 
aggregate  of  the  mutual  subscriptions  of  the  stockholders,  paid  in  as  the 
basis  of  the  business  of  the  concern,  and  which  belongs  to  the  company." 
Commonwealth  v.  Charlottesville  P.  B.  and  L.  Co  ,  90  Va.  790,  793. 


The  Tax  on  Corporate  Excess.  223 

tax  on  personal  property  in  the  preceding  title,  and  are  not 
included  here  under  the  tax  on  capital  stock. 

Theoretically,  as  the  capital  stock  merely  represents  the 
corporate  property,  and  can  have  no  value  independent  of 
such  property,  it  would  seem  to  be  immaterial  whether  the 
one  or  the  other  is  the  basis  of  taxation.  But,  owing  to  the 
difficulty  of  reaching  under  the  ordinary  property  tax  all 
the  elements  which  give  value  to  the  capital  stock,  the  dis- 
tinction is  one  of  considerable  practical  importance. 

The  tax  on  the  capital  stock  on  the  basis  of  the  share  value 
is  in  its  practical  effect  plainly  a  property  tax.  It  is  also 
so  designated  in  the  statutes  and  judicial  decisions  of  the 
majority  of  the  states.24  In  some  states,  however,  this  tax 
is  termed  a  franchise  tax.  The  distinction  between  a  prop- 
erty tax  and  a  franchise  tax,  and  the  fuller  discretion 
allowed  in  the  assessment  of  the  franchise  tax,  is  pointed 
out  in  Chapter  VII.  The  description  of  this  tax  as  a  fran- 
chise tax  is  designed  to  permit  a  method  of  assessment 
which,  if  regarded  as  a  property  tax,  would  be  contrary  to 
some  constitutional  provision.  Thus  in.  Massachusetts, 
where  it  is  termed  a  franchise  tax,  the  courts  were  reduced 
to  the  necessity  of  describing  it  as  an  "  excise"  on  a 
"  commodity."  <25  The  tax  which  is  thus  by  a  legal  fiction 
called  a  franchise  tax  is  totally  unlike  a  franchise  tax  in  the 
exact  sense  of  that  term.  The  only  way  to  avoid  confusion 
and  to  make  a  classification  based  on  the  underlying  princi- 
ples of  corporate  taxation  is  to  disregard  technical  phrase- 
ology and  to  look  only  at  the  practical  operation  of  the  law. 

ART.  1.  THE  TAX  ON  CORPORATE  EXCESS. 

When  a  corporation  is  taxed  on  its  property  in  the  same 
manner  as  individuals,  the  aggregate  value  of  the  various 
assessment  schedules  may  fall  far  below  the  value  of  the 
entire  business  plant  or  enterprise  of  such  corporation  con- 

24  For  example,  in  Alabama,  Indiana,  Missouri  and  Pennsylvania.     Cf. 
Whitney  v.  City,  23  Ind.  331 ;  Hannibal  Ry.  Co.  v.  Shacklett,  30  Mo. 
550;  Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  State,  119. 

25  Commonwealth  v.  Hamilton  Mfg.  Co.,  12  Allen,  298.     The  tax  is 
paid  directly  to  the   state  treasurer,  and  is  levied  on  the  fair  cash 
value  of  the  capital  stock  at  the  average  rate  of  the  general  property 
tax  in  all  the  towns  and  cities  of  the  Commonwealth. 


224  Digest  of  Corporation  JLaws. 

sidered  as  a  unit,  and  measured  by  the  aggregate  value  of 
its  shares  of  stock.  On  the  theory  that  every  element  or 
factor  which  gives  to  the  corporation  a  value  for  income  or 
sale  should  be  considered  in  fixing  the  taxable  value,  this 
unassessed  residuum  is  reached  by  a  tax  which  is  generally 
termed  the  "  Tax  on  Corporate  Excess." 

The  constituent  factors  of  this  corporate  excess  are  the 
good  will  of  the  enterprise,  its  administrative  efficiency,  its 
potentiality  of  future  success,  the  advantage  of  corporate 
organization  and  other  intangible  elements  hard  to  analyze 
and  classify.  Instead  of  attempting  to  define  it  and  to 
classify  it  directly,  the  taxing  authority  is  content  to  reach 
its  value  by  deducting  the  valuation  of  the  property  specifi- 
cally taxed  from  the  total  value  of  the  capital  stock,  and  to 
tax  the  residuum  somewhat  vaguely  as  "  corporate  excess." 

Of  course  where  the  property  of  the  corporation  other- 
wise taxed  equals  or  exceeds  the  aggregate  value  of  the 
shares  of  stock  there  is  no  excess  remaining  for  taxation. 

Sec.  a.    The  tax  is  assessed  in  a  lump  sum  directly  to  the 

corporation. 

Arkansas,  Stat.,  §  6462. 

California™  Constit.,  Art.  13,  §  1 ;  Pol.  Code, 
§§  3608,  3641. 

Colorado,  L.  1902,  Ch.  3,  §  60. 

District  of  Columbia,  U.  S.  Stat.  1902,  Ch.  1352, 

§  6,  f8. 

Illinois,  R.  S.,  Ch.  120,  §  3.  (Except  purely 
manufacturing,  stock-breeding,  news- 
paper-publishing and  coal-mining  cor- 
porations, which  are  exempt  from  this 
tax.) 

Indiana,  Ann.  Stat.,  §  8492. 

Indian  Territory,  Stat.,  §  4960. 

26  The  tax  on  corporate  excess  is  not  expressly  authorized,  but  the 
courts  have  held  that  the  tax  on  corporate  franchises  prescribed  by  the 
constitution  and  the  statutes  is  in  substance  a  tax  on  the  corporate  ex- 
cess, and  that  the  valuation  may  be  made  by  deducting  the  real  estate 
and  personal  property  separately  taxed  from  the  share  value  of  the 
capital  stock.  Spring  Valley  Water  W.  Co.  v.  Schottler,  62  Cal.  69. 


Corporate  Excess  Taxed  to  Corporation.     225 

Kansas,  G.  S.,  §  7515.  (Except  manufacturing  and 
stockyard  corporations,  which  are  ex- 
empt from  this  tax. ) 

Louisiana,™  L.  1898,  No.  170,  §§7,  17,  28. 
Massachusetts,  R.  L.,  Ch.  14,  §  38.      (See  note  25.) 
Michigan,  Comp.  L.,    §   3842.      (Except   manufac- 
turing corporations,  which  are  exempt 
from  this  tax.) 
Mississippi™  Code,  §  3758. 
Nebraska,  Comp.  Stat.,  §  4313. 
North  Carolina,  L.  1901,  Ch.  9,  §  6. 
South    Carolina,-*  Constit.,    Art.    10,    §    5;    Code, 
§§268,114,304.  (Butadomestic 
.   corporation  owning  property  both 
within  and  without   this    state  is 
not  taxed  on  its  capital  stock,  but 
on   such   property  as   it  owns  in 
this  state,  and  such  proportion  of 
the  value  of  its  other  property  as, 
if  owned   by  the  individual  resi- 
dents of  this  state,  would  be  tax- 
able in  this  state.) 
Tennessee,  L.  1901,  Ch.  174,  §§  22,  23,  24. 

87  The  statute  is  extremely  vague.  Though  no  special  method  of 
assessment  is  authorized  for  corporations,  the  statute  seems  to  provide 
for  a  tax  on  the  corporate  excess.  Corporations  are  taxed  on  their 
moneys,  credits,  etc.,  in  addition  to  their  capital  stock.  The  capital 
stock  of  individuals,  business  firms  and  corporations  is  "  based  on  the 
actual  market  value  of  the  capital  stock,  shares,  etc.,  less  than  real 
estate."  Such  valuation  shall  represent  in  the  aggregate  "  a  fair  aver- 
age on  the  capital,  both  cash  and  credit,  employed  in  the  business  of 
the  parties  assessed  ." —  Ibid. 

28  By  a  fair  construction  of  the  statute,  a  tax  is  authorized  on  the  total 
property  and  total  capital  stock  of  corporations.  But  the  courts  have 
restrained  the  meaning  of  a  statute  apparently  authorizing  double  taxa- 
tion, and  haVe  held  that  the  value  of  the  property  separately  assessed 
should  be  deducted  in  taxing  the  capital  stock.  State  v.  Simmons,  70 
Miss.  485  ;  Adams  v.  Tombigbee  Mills,  78  Miss.  676,  694. 

89  The  law  as  a  whole  is  not  clear,  and  it  has  noi  been  construed  by 
the  courts.  Corporations  are  required  to  list  their  capital  and  property 
for  taxation,  and  the  shareholders  are  exempt.  It  is  also  provided  that 
all  shares  of  stock  shall  be  listed  where  the  corporation  is  located,  and 


226  Digest  of  Corporation  Laws. 


Sec.  b.    The  corporation  is  not  directly  taxed,  but  the  tax 
is  assessed  ratably  to  the  individual  shareholders. 

As  a  corporation  is  an  independent  legal  entity,  the 
taxation  of  the  shareholders  is  not  strictly  a  corporation 
tax.  But  as  the  shares  of  stock  are  merely  fractional  parts 
of  the  capital  stock,  and,  equally  with  the  capital  stock, 
have  no  substantive  and  independent  existence  apart  from 
the  corporate  property,  they  would  seem  to  be  an  integral 
part  of  the  scheme  of  corporate  taxation. 

It  is  true  that  the  courts  in  some  states  have  taken  the 
ground  that  the  capital  stock  and  shares  represent  different 
property  interests  and  being,  therefore,  distinct  subjects  of 
taxation,  both  may  be  taxed  without  constituting  double 
taxation-.30  This  doctrine,  however,  has  usually  been  de- 
clared in  construing  statutory  or  charter  exemptions  from 
taxation  in  the  case  of  banking,  insurance  or  public  service 
corporations,  where  no  question  of  double  taxation  has  been 
directly  involved,  but  where  the  practical  issue  has  been 
whether  the  corporate  property  should  be  subject  to  taxation 
in  any  form.  In  the  case  of  business  corporations  at  least, 
this  doctrine  does  not  seem  to  be  carried  out  to  its  logical 
result  of  taxing  both  the  capital  stock  and  shares.  A  greater 
readiness  has  been  shown  to  tax  the  corporate  property  as 
well  as  the  shares  of  stock  at  their  full  value,  but  even  such 
taxation  has,  by  this  time,  been  abandoned  in  almost  all  the 
states. 

The  more  common  view,  however,  and  the  sounder  view 

that  their  value  shall  include  the  capital  surplus  and  all  other  personal 
property  of  the  corporation.  Apparently  this  means  that  the  corpora- 
tion shall  be  assessed  for  the  share  value  of  its  capital  stock,  less  real 
estate.  As  the  constitution  seems  to  prohibit  double  taxation,  allowance 
may  perhaps  be  made  also  for  the  personal  property  separately  assessed, 
though  this  is  nowhere  declared  in  the  statutes. 

Tarrington  v.  Tennessee,  95  U.  S.  679;  Shelby  Co.  v.  U.  P.  Bank, 
161  U.  S.  149  ;  Jefferson  Co.  Sav.  Bk.  v.  Hewitt,  112  Ala.  546  ;  Porter  v. 
Rockford,  etc.,  R.R.,  76  111.  561;  Cook  v.  Burlington,  89  Iowa,  251; 
Belo  v.  Comm'rs,  82  N.  C.  415 ;  Providence,  etc,,  R.R.  v.  Wright,  2  R.  I. 
459;  State  v.  Hernando  Ins.  Co.,  97  Tenn.  85;  Jennings  v.  Comm.,  98 
Va.  80  ;  Comm.  v.  Charlottesville,  90  Va.  790 ;  Second  VVard  Sav.  Bk.  v. 
Milwaukee  (Wis.),  69  Pac.  Rep.  359. 


Corporate  Excess  Taxed  to  Shareholders.   227 

economically,  if  not  legally,  is  that  the  taxation  of  the  capital 
stock  and  the  taxation  of  the  individual  shares  are  merely 
different  methods  of  taxing  the  corporate  property.  The 
identity  of  the  capital  stock  and  the  shares  of  stock  for  the 
purposes  of  taxation  has  not  only  been  affirmed  by  numerous 
judicial  decisions,31  but  it  has  been  recognized  in  most  of  ~ 
the  states  by  statutes  which  provide  that  when  the  capital 
stock  or  corporate  property  is  assessed  to  the  corporation, 
the  shares  in  the  hands  of  the  individual  shareholders  shall 
be  exempt.  Some  states,  such  as  Arizona,  California  and 
Wyoming,32  have  not  merely  tacitly  recognized  such  identity, 
but  have  expressly  affirmed  it.  Thus  the  California  statute 
declares  that  "  shares  of  stock  possess  no  intrinsic  value 
over  and.  above  the  actual  value  of  the  property  of  the 
corporation  which  they  stand  for  and  represent,  and  the 
taxation  of  such  shares  and  also  of  the  corporate  property 
would  be  double  taxation." 

Some  states,  as  we  have  just  seen,  assess  the  capital  stock 
excess  in  a  lump  sum  to  the  corporation,  and  exempt  the 
shares  of  the  individual  shareholders.  Conversely,  the  states 
which  immediately  follow  assess  this  stock  excess  ratably  to 
the  individual  shareholders,  and  exempt  the  corporation  from 
any  direct  tax  on  its  capital  stock. 

Par.  1.    The  tax  is  collected  directly  from  the  shareholders. 

Maine,  R.  S.,  Ch.  6,  §§  5,  14,  Iff  3,  28.  (Except 
manufacturing,  mining  and  smelt- 
ing corporations.) 

Minnesota™  Stat.,  §§  1510,  1530. 

31  Burke  v.  Badlam,  57  Cal.  594 ;  San  Francisco  v.  MacKay,  22  Fed. 
Rep.  602  ;  New  Haven  v.  City  Bank,  31  Conn.  108  ;  Johnson  v.  Comm., 
7  Dana  (Ky.)  342  ;  Penrose  v.  Chaffraix  (La.),  30  So.  Rep.  718 ;  Mayor 
of  Baltimore  v.  B.  &  O.  Ry.,  6  Gill  (Md.)  288 ;  State  v.  St.  Louis,  etc., 
R.R.  Co.,  77  Mo.  202 ;  Cheshire  Co.  Tel.  Co.  v.  State,   63  N.  H.    167 ; 
State  v.  Jones,  9  Vroom  (N.  J.),  83 ;  Comm.  v.  Lehigh,  etc.,  Co.,  162  Pa. 
603;  Gillespie  v.  Gaston,  67  Tex.  599 ;  Lewiston,  etc.,  Co.  v.  Asoten  Co., 
24  Wash.  371. 

32  Arizona,  R.  S.,  §  3837 ;  California,  Pol.  Code,  §  3608 ;  Wyoming,  L, 
1895,  Ch.  87. 

33  At  a  special  session  of  the  Minnesota  Legislature  convened  in  1902, 
mainly  for  the  purpose  of  revising  the  tax  laws,  an  amendment  to  the 


228  Digest  of  Corporation  Laws. 

New  Hampshire,  P.  S.,  Ch.  55,  §§  7,  9;  58,  §  1. 
(But  if  the  corporation  does  not 
declare  a  dividend  the  stock  is 
not  taxed. ) 

North  Dakota,  L.  1897,  Ch.  126,  §  25. 

Rhode  Island,  G.  L.,  Ch.  46,  §  12. 

South  Dakota,  Ann.  Stat.,  §§  2134,  2137,  2154. 
Vermont,  Stat.,  §§  378,  379. 

Par.  2     The  tax  is  collected  from  tlie  corporation  as  the  agent  of 
its  shareholders,  and  the  tax  so  paid  is  a  lien  on  the  shares. 

The  purpose  of  this  provision  is  to  reach  the  shares  of 
non-residents  which  would  otherwise  escape  taxation.  The 
constitutionality  of  such  a  tax  on  non-resident  shareholders 
has  been  upheld.34 

Alabama,  Civ.  Code,  §  4123,  L.  1901,  p.  2598,  §  6. 

Iowa,  Code,  §  1325.  (Except  manufacturing  cor- 
porations, whose  shareholders  are  ex- 
empt from  this  tax.) 

Maine,  R.  S.,  Ch.  6,  §  30  ;  L.  1891,  Ch.  130,  §  1.  (In 
case  of  non-resident  shareholders  only.) 

Maryland,  P.  G.  L.,  Ch.  81,  §  141. 

New  Hampshire,  P.  S.,  Ch.  57,  §  19.  (Apparently 
the  corporation  must  pay  the  tax  on 
the  shares  of  its  non-resident  share- 
holders.) 

Vermont,  Stat.,  §§  378,  379.  (In  case  of  non-resi- 
dent shareholders  only.) 

constitution  was  proposed,  authorizing  the  levy  of  a  graded  or  pro- 
gressive income  tax  on  personal  property  in  lieu  of  all  other  taxes 
on  the  same.  (L.  1902,  Ch.  1.)  This  amendment  was  submitted  to 
vote  of  the  people  at  the  recent  election,  but  as  a  majority  of  the  total 
vote  cast  is  required  to  carry  a  constitutional  amendment,  and  as  fully 
fifty  per  cent,  of  those  voting  refrained  from  voting  on  the  amendment 
in  any  way,  it  failed  to  become  law. 

34  Tappan  v.  Merchants'  National  Bank,  19  Wall.  (U.  S.)  490 ;  Dela- 
ware Railroad  Tax  Case,  18  Wall.  208;  New  Orleans  v.  Houston,  119 


The  Tax  on  the  Total  Capital  Stock.      229 


ART.  2.  THE  TAX  ON  THE  TOTAL  CAPITAL  STOCK. 

Apparently  the  states  included  in  this  title  tax  the  full 
amount  of  the  capital  stock  on  the  basis  of  the  share  value 
without  any  deduction  of  the  property  separately  taxed 
under  titles  A  and  B.  As  the  capital  stock  represents,  or 
at  least  includes  the  value  of  the  real  estate  and  ordinary 
personal  property,  the  taxation  of  the  corporate  property, 
in  addition  to  the  total  capital  stock,  is  to  that  extent  double 
taxation. 

Nowhere  is  a  corporation  now  taxed  directly  both  on 
its  property  and  the  full  value  of  its  capital  stock.  In 
some  states,  however,  the  corporation  is  directly  taxed  on 
its  property,  while  the  shareholders  are  also  taxed  on  the 
full  value  of  the  shares  of  stock.  This  method  of  taxation, 
though  differing  in  form,  is  in  its  practical  operation,  as  we 
have  shown  above,  equally  open  to  objection  as  being  double 
taxation.  But  however  inequitable  such  taxation  may  ap- 
pear the  courts  of  some  states  have  sustained  its  legality, 
either  by  denying  the  identity  of  the  corporate  stock  and 
property,  and  holding  that  it  is  not  double  taxation,  or  else 
by  declaring  that  though  it  is  double  taxation  it  is  not  on 
that  account  unconstitutional.35 

In  the  case  of  business  corporations,  however,  the  practice 
of  taxing  both  the  total  corporate  property  and  the  full 
value  of  the  shares  of  stock  has  apparently  been  abandoned 
everywhere  except  in  Oklahoma,  where  such  taxation  would 
seem  to  be  authorized  by  the  statutes.  But  the  question 
has  not  been  passed  upon  by  the  territorial  courts. 

U.S.  265;  State  v.  Travellers  Ins.  Co,  70  Conn.  590;  First  National 
Bank  Mendota  v.  Smith,  65  111.  44 ;  Tax  Collector  v.  Insurance  Co.,  42 
La.  Annual,  1172. 

35  Farrington  v.  Tennessee,  95  U,  S.  679,  687 ;  New  Orleans  v.  Hous- 
ton, 119  U.  S.,  265,  277 ;  Ryan  v.  Commrs.,  30  Kan.  185;  Second  Ward 
Savings  Bank  v.  Milwaukee,  94  Wis.  587 ;  Toll  Bridge  Co.  v.  Osborn, 
35  Conn.  7;  Pittsburgh,  etc,  R.R.  Co.  v.  Pennsylvania,  66  Pa.  St.  77; 
Cook  v.  Burlington,  59  Iowa,  251 ;  Memphis  v.  Ensley,  6  Baxt.  (Tenn.) 
553. 


230  Digest  of  Corporation  Laws. 


Sec.  a.    The  tax  is  assessed  in  a  lump  sum  directly  to  the 

corporation. 

New  Mexico,36  Comp.  L.,  §§  4024,  4028. 

Pennsylvania ,37  Dig.  L.,  Taxation,  §§  2,  520.  (But 
manufacturing  corporations  are 
exempt  on  the  amount  of  capital 
actually  employed  in  manufactur- 
ing in  the  state.) 


Sec.  b.     The   shares   of   stock    are    assessed   at   their  full 
market  value  to  the  individual  holders.35 

Delaware,39  L.  1898,  Ch.  25.  (But  the  shares  are 
assessed  at  three-fourths  only  of  their 
actual  cash  value.) 

Oklahoma,  Stat.,  §§  5577,  5580,  5583,  5596. 

36  The  statutes  provide  that  corporation  shares  shall  be  taxed  at  their 
cash  value ;  that  the  property  of  every  corporation  shall  be  taxed  to  the 
corporation,  and  the  corporation  may  charge  the  same  ratably  to  its 
shareholders ;  and  that  where  the  entire  property  or  capital  of  the  cor- 
poration is  taxed,  the  shareholders  shall  be  exempt.    This  is  not  entirely 
clear,  but  it  seems  to  provide  for  a  tax  on  the  capital  stock  as  represent- 
ing the  corporate  property.    In  practice  it  seem  to  be  discretionary 
whether  the  corporation  pays  the  tax  and  charges  it  up  to  the  share- 
holders, or  whether  the  latter  pay  the  tax  directly  on  their  individual 
shares.    In  either  case,  if  we  have  stated  the  law  correctly,  there  would 
not  be  double  taxation. 

37  As  there  is  no  other  state  tax  on  corporations,  the  assessment  of  the 
capital  stock  at  its  full  value  is  not  double  taxation.     But  the  real  estate, 
horses  and  cattle  owned  by  the  corporation  are  assessed  for  local  pur- 
poses. 

38  In  Missouri  by  the  letter  of  the  statute  shares  of  stock  would  seem 
to  be  liable  to  taxation.     But  in  the  absence  of  an  express  declaration 
to  that  effect,  the  law  is  to  be  construed  so  as  to  avoid  duplicate  taxa- 
tion.   As  the  corporation  is  taxed  on  its  property,  its  capital  stock  is  not 
taxable  either  to  the  corporation  itself  or  to  the  individual  shareholders. 
Valle  v.  Ziegler,  84  Mo.  214.    See  also  Note  2. 

39  As  corporations  pay  no  tax  on  their  tangible  personalty,  there  is 
double  taxation  of  their  real  estate  and  investments  only,  and  this  is 
offset  by  the  reduced  valuation. 


The   Valuation  of  the  Capital  Stock.        231 


ART.  3.    THE  METHOD  OF  ASCERTAINING  THE  TAXABLE  VALUE  OF 
THE  CAPITAL  STOCK  OR  SHARES. 

Sec.  a.  The  value  is  represented  by  the  market  value,  or,  if 
there  is  no  market  value,  by  the  actual  value  of  the 
shares  of  stock. 

Arkansas,  R.  S.,  §  6462. 

California.®  (Such  method  of  valuation  has  been 
approved  by  the  courts.) 

Delaware,  L.  1898,  Ch.  25,  §  2.  (Three-fourths  of 
such  value  only.) 

Illinois,  R.  S.,  Ch.  120,  §  3.  (And  the  value  of  the 
outstanding  bonds  is  included  as  part 
of  the  corporate  capital  and  assets. 
See  below,  Title  D.) 

Indian  Territory,  Stat.,  §  4960. 

Kansas,  G.  S.,  §§  7515,  7529. 

Maine,  R.  S.,  Ch.  6,  §  14,  IT  3. 

Maryland,  P.  G.  L.,  Ch.  81,  §§  141,  138;  L.  1902, 
Ch.  468.  (But  whether  the  stock  is 
quoted  in  the  market  or  not,  the  value 
shall  not  be  less  than  the  full  value  of 
the  real  estate  and  chattels  belonging 
to  the  corporation.) 

Massachusetts,  R.  L.,  Ch.  14,  §  38, 

Michigan,  Comp.  L.,  §  3842. 

Minnesota,  Stat.,  §  1530. 

Mississippi,  Code,  §  3758. 

Nebraska,  Comp.  Stat.,  §  4313. 

New  Mexico,  Comp.  L.,  §  4028. 

North  Dakota,  L.  1897,  Ch.  126,  §  25. 

Oklahoma,  Stat.,  §§  5577,  5580,  5583. 

Rhode  Island,  G.  L.,  Ch.  46,  §  12. 

South  Carolina,  Code,  §§  268,  1HF  4,  337. 

South  Dakota,  Ann.  Stat.,  §  2154. 

Vermont,  Stat.,  §§  378,  379. 

*°  Spring  Valley  W.  W.  v.  Schottler,  62  Cal.  69, 117.    See  note  25. 


232  Digest  of  Corporation  Laws. 


Sec.  b.  The  market  value  of  the  shares  of  stock  is  taken 
into  account,  but  is  not  controlling.  Other  factors 
which  help  to  determine  the  value  of  the  corporation 
property  for  the  purposes  of  income  or  sale  are  also 
considered. 

Alabama,  L.  1901,  p.  2598,  §  6. 

Colorado,  L.  1902,  Ch.  3,  §§  60,  61.  (And  the 
value  of  the  outstanding  bonds  is  in- 
cluded as  part  of  the  corporate  capital 
and  assets.  See  below,  Title  D.) 

District  of  Columbia,  U.  S.  Stat.  1902,  Ch.  1352,  §  6, 
IF  8.  (The  capital  stock  is  assessed  at 
its  fair  cash  value.) 

Indiana,  Stat.,  §  8492.  (But  if  the  franchise  is  of 
greater  value,  then  the  franchise  and  not 
the  capital  stock  is  assessed.) 

Iowa,  Code,  §  1323. 

New  Hampshire,  P.  S.,  Ch.  58,  §  1. 

Pennsylvania,  Dig.  L.,  Taxation,  §  2. 

Tennessee,  L.  1901,  Ch.  174,  §  22.  (And  the  value 
of  the  outstanding  bonds  is  included 
as  part  of  the  corporate  capital  and 
assets.  See  below,  Title  D.) 

Par.  1.    The  gross  earnings  and  income  of  the  corporation  are  con- 
sidered in  fixing  the  value  of  the  capital  stock. 

Colorado,  L.  1902,  Ch.  3,  §  63,  IF  7.  (If  doing 
business  in  two  or  more  counties  of 
the  state.) 

Iowa,  Code,  §  1323. 

Pennsylvania,  Dig.  L.,  Taxation,  §  2. 

Par.  2.    The  net   earnings,  dividends   and   surplus   profits   are  con- 
sidered 

Alabama,  Civ.  Code,  §  3911,  f  9  ;  L.  1901,  §  6. 
Colorado,  L.   1902,  Ch.   3,   §   63,  IF  8.      (If  doing 

business  in  two  or  more  counties  of 

the  state.) 

Iowa,  Code,  §  1323. 
Pennsylvania,  Dig.  L.,  Taxation,  §  2. 
Tennessee,  L.  1901,  Ch.  174,  §§  22,  23. 


Deductions  for  Corporate  Excess.  233 


Par.  3.  The  moneys,  credits,  stocks  and  bonds  owned  by  the  corpora- 
tion are  not  separately  taxed  as  such,  but  they  are  considered 
in  fixing  the  value  of  the  capital  stock. 

Tennessee,  L.  1901,  Ch.  174,  §§  22,  23. 


Par.  4.  The  amount  of  the  corporate  indebtedness  is  not  specifically 
added  to  or  deducted  from  the  value  otherwise  ascertained 
but  it  is  a  factor  to  be  considered  in  fixing  the  total  valuation. 

Indiana,  Ann.  Stat.,  §  849 1.41 
Pennsylvania,  Dig.  L.,  Taxation,  §§  2,  3. 

Sec.  c.  The  value  of  the  capital  stock  is  indicated  or  measured 
by  the  rate  of  dividend  and  amount  of  surplus,  but  the 
market  value  of  the  shares  of  stock  is  also  considered. 

North  Carolina,  L.  1901,  Ch.  9,  §  6. 

Pennsylvania,  Dig.  L.,  Taxation,  §  2.  (The  as- 
sessed value  shall  not  be  less  than 
the  value  indicated  by  the  dividends 
but  may  be  greater.  See  Section  b, 
supra.) 

Sec.  d.  In  default  of  other  methods  for  determining  the  value 
of  the  entire  corporate  plant,  the  value  of  the  use  of  the 
property,  and  the  capability  of  use  and  the  cost  of  dupli- 
cation may  be  considered  with  other  evidence. 

Colorado,  L.  1902,  Ch.  3,  §  60. 

ART.  4.  THE  DEDUCTIONS  ALLOWED  FROM  THE  VALUE  SO  ASCER- 
TAINED IN  ORDER  TO  FIX  THE  TAXABLE  RESIDUUM  OR 
CORPORATE  EXCESS. 

By  comparing  the  property  taxed  under  titles  A  and  B 
above  with  that  deducted  in  the  assessment  of  this  tax,  it 
may  be  seen  to  what  extent,  if  any,  double  taxation  is 
allowed  in  the  various  states. 


Sec.  a.    The  value  of  the  real  estate  separately  taxed  is  de- 
ducted. 

Alabama,  L.  1901,  p.  2598,  §  6. 
Arkansas,  Stat.,  §  6462. 

41  Cf .  Hyland  v.  Central  Iron  &  Steel  Co.,  129  Ind.  68. 


234  Digest  of  Corporation  Laws. 

California.      (See  note  25.) 

Colorado,  L.  1902,  Ch.  3,  §  GO. 

District  of  Columbia,  U.  S.,  Stat.   1902,  Ch.   1352, 

§6,f  8. 

Illinois,  K.  S.,  Ch.  120,  §  3. 
Indiana,  Ann.  Stat.,  §  8492. 
Indian  Territory,  Stat.,  §  4960. 
Iowa,  Code,  §  1323. 
Kansas,  G.  S.,  §  7515. 
Louisiana,  L.  1898,  No.  170,  §  17. 
Jtfawe,  R.  S.,  Ch.  6,  §  14,  f  3. 
Maryland,  P.  G.  L.,  Ch.  81,  §  141. 
Massachusetts,  R.  L.,  CH.  14,  §  38. 
Michigan,  Com  p.  L.,  §  3842. 
Minnesota,  Stat.,  §  1530. 
Mississippi.      (See  note  28.) 
Nebraska,  Comp.  Stat.,  §  4313. 

Hampshire,  P.  S.,  Ch.  58,  §  1. 

Carolina,  L.  1901,  Ch.  9,  §  6. 

Dakota,  L.  1897,  Ch.  126,  §  25. 
Rhode  Island,  G.  L.,  Ch.  46,  §  12. 
South  Carolina.      (See  note  29.) 
>&m£A  Dakota,  Ann.  Stat.,  §  2154. 
Tennessee,  L.  1901,  Ch.  174,  §§  22,  23,  24. 
Vermont,  Stat.,  §  383. 

• 

Sec.  b.    The  value  of  the  personal  property  separately  taxed 

is  deducted. 

Alabama,  L.  1901,  p.  2598,  §  6. 
California.      (See  note  25.) 
Kansas,  G.  S.,  §  7515. 
Missisippi.      (See  note  28.) 
Nebraska,  Comp.  Stat.,  §  4313. 
New  Hampshire,  P.  S.,  Ch.  58,  §  1. 
North  Dakota,  L.  1897,  Ch.  126,  §  25, 
South  Dakota,  Ann.  Stat.,  §  2154. 
Vermont,  Stat.,  §  383.      (Such  deduction  is  allowed 
to  manufacturing  corporations  only.) 


Deductions  for  Corporate  Excess.  235 


Sec.  c.    The  value  of  the  tangible  personal  property  separately 
taxed  is  deducted. 

Arkansas,  Stat.,  §  6462. 

Illinois,  R.  S.,  Ch.  120,  §  3. 

Indiana,  Ann.  Stat.,  §  8492. 

Indian  Territory,  Stat.,  §  4960. 

Maine,  R.  S.,  Ch.  6,  §  14,  f  3.  (Machinery  em- 
ployed in  manufacture  and  goods  manu- 
factured or  unmanufactured.) 

Minnesota,  Stat.,  §  1530. 

North  Carolina,  L.  1901,  Ch.  9,  §  6. 

Tennessee,  L.  1901,  Ch.  174,  §§  22,  23,  24. 

Sec.  d.    The  value  of  the  machinery  of  the  corporation  sepa- 
rately taxed  is  deducted. 

Massachusetts,  R.  L.,  Ch.  14,  §  38. 
mode  Island,  G.  L.,  Ch.  46,  §  12. 

Sec.  e.    The  value  of  the  property  without  the  state  is  de- 
ducted. 

Where  such  deduction  is  not  expressly  prescribed,  the 
courts  in  some  states  have  declared  that  the  capital  stock  is 
the  equivalent  of  the  corporate  property  and  subject  to 
deduction  for  property  located  outside  the  state  to  the  same 
extent  as  if  the  corporate  property  instead  of  the  capital 
stock  were  the  basis  of  taxation.  (See  Title  B,  Art.  5, 
supra.)  4- 

Par.  1.    The  value  of  all  property  without  the  state  is  deducted. 
Colorado,  L.  1902,  Ch.  3,  §  60. 

Indiana,  Ann.  Stat.,  §  8411.  (If  permanently  in- 
vested in  business  in  another  state.) 

Par.  2.    The  value  of  the  real  estate  without  the  state  is  deducted. 

Iowa,  Code,  §  1323. 

Massachusetts,  R.  L.,  Ch.  14,  §  38.     (And  the  value 

of  machinery  without  the  state  is  also 

deducted.) 
New  York,  G.  L.,  Ch.  24,  §  31. 

42  Cf.  Commonwealth  v.  Am.  Dredging  Co.,  122  Pa.  386. 


236  Digest  of  Corporation  Laws. 


Sec.  f.    The  amount  of  the  bonded  or  other  indebtedness  is 
deducted. « 

The  general  question  of  the  relation  between  the  corporate 
capital  stock  and  bonds  for  the  purposes  of  taxation  is  con- 
sidered in  Title  D. 

Nebraska,  Comp.  Stat.,  §  4313. 
North  Dakota,  L.  1897,  Ch.  126,  §  25. 
South  Dakota,  Ann.  Stat.,  §  2154. 


Sec.  g.    The  amount  of  the  capital  invested  in  non-taxable 
stocks  or  securities  is  deducted. 

This  section  applies  to  investments  in  United  States 
bonds  or  the  bonds  of  the  taxing  state  (where  they  are 
declared  exempt)  and  to  investments  in  the  stock  of  other 
corporations  which  are  directly  taxed  on  their  capital  stock. 
Where  there  is  no  express  provision  for  such  deduction  the 
courts  of  some  states,  on  the  principle  that  the  capital  stock 
represents  the  property  in  which  it  is  invested,  have  held 
that  the  capital  stock,  to  the  extent  that  it  is  invested  in 
non-taxable  securities,  is  relieved  from  taxation.44  In  the 
case  of  a  franchise  tax,  however,  the  tax  is  not  affected  in 
any  way  by  the  character  of  the  property  in  which  the 
capital  stock  is  invested.45 

Maryland,  P.  G.  L.,  Ch.  81,  §  142. 
New  York,  G.  L.,  Ch.  24,  §  12. 

43  In  Minnesota  the  statute  expressly  authorizes  a  deduction  of  the 
corporate  indebtedness  (Stat.,  §  1530).     But,  on  the  ground  that  the 
indebtedness  depreciates  the  market  value  of  the  stock,  and  that  the  in- 
debtedness has  thus  already  been  made  a  factor  in  the  tax  valuation, 
the  provision  for  a  separate  deduction  of  the  indebtedness  is  held  uncon- 
stitutional.    This,  however,  does  not  render  the  rest  of  section   1530 
invalid.     State  v.  Duluth  Gas  &  W.  Co.,  76  Minn.  96. 

44  Provident  Institution  v .  Mass.,  6  Wall.  (U.  S.)  611,  629  ;  Comm.  v. 
Lehigh  Coal  &  N.  Co.,  162  Pa.  St.  603. 

45  Society  for  Savings  v.  Coite,  6  Wall.  (U.  S.)  594. 


The  Tax  on  Corporate  Bonds.  237 


TITLE  D.    THE   TAX  ON  CORPORATE   BONDS. 

The  theory  that  the  capital  stock  represents  the  total  cor- 
porate property  and  assets  is  economically  sound  if  the 
corporation  has  no  bonded  debt.  But  if  the  corporation  has- 
a  bonded  debt,  the  corporate  property  is  security  for  the 
outstanding  bonds,  and  the  share  value  represents  only  the^ 
equity  in  the  property  subject  to  the  lien  of  the  bonded 
debt.  The  corporate  bonds,  therefore,  represent  a  portion, 
and  often  the  most  considerable  portion,  of  the  corporate 
assets,  and  manifestly  should  be  made  liable  to  taxation, 
either  by  taxing  the  individual  bondholders,  or  by  taxing 
the  corporation  on  the  value  of  its  bonds  in  addition  to  its 
shares  of  capital  stock. 

Some  states,  however,  instead  of  so  doing,  deduct  the 
amount  of  the  bonded  indebtedness  from  the  share  value. 
(See  page  236,  above.)  This  is  done  on  the  analogy  of  de- 
ducting debts  from  credits,  but  the  conditions  are  wholly 
dissimilar,  and  such  deduction  cannot  be  justified  even  if  the 
bonds  are  taxed  to  the  individual  bondholders.  The  shares 
are  a  barometer  of  the  financial  condition  of  the  corporation, 
and  the  amount  of  indebtedness,  like  all  other  factors  in  the 
financial  status  of  the  corporation,  is  reflected  in  the  market 
value  of  the  shares.  The  judicial  ruling  in  Minnesota  that 
such  deduction  destroys  the  whole  principle  of  uniformity  of 
taxation,  and  is  therefore  unconstitutional,  seems  entirely 
sound.46 

Such  bonded  indebtedness,  so  far  from  being  deducted, 
should  be  included  in  the  taxable  value  of  the  corporate 
property.  Owing  to  the  difficulty  of  discovering  bonds  and 
other  securities  in  the  hands  of  the  individual  holders  for 
the  purposes  of  taxation,  the  most  efficient  method  would 
undoubtedly  be  to  tax  the  corporation  directly  for  the 
amount  and  value  of  its  outstanding  bonds,  and  to  allow  it 
to  recoup  the  tax  so  paid  from  the  interest  accruing  to  the 
individual  bondholders.  Unfortunately,  however,  a  legal 
difficulty  stands  in  the  way  of  the  effective  operation  of  such 
a  method  of  taxation. 

46  See  note  43. 


238  Digest  of  Corporation  Laws. 

The  United  States  Supreme  Court  has  held  that  the  bonds 
are  not  the  property  of  the  debtor,  that  is  the  corporation, 
but  of  the  creditors,  that  is  the  bondholders  ;  that  a  tax  on 
the  bonds  of  the  corporation  is  therefore  a  tax  on  the  bond- 
holders, and,  as  a  state  has  sovereignty  only  within  its  own 
borders,  a  tax  on  corporate  bonds  is  invalid  as  to  non- 
residents.47 It  seems  a  little  anomalous  at  first  sight  that 
non-resident  shareholders  can  be  taxed,48  while  non-resident 
bondholders  cannot,  but  there  is  no  question  that  such  is  the 
law.  The  practical  result  of  this  is  that  a  large  portion  of 
the  capital  invested  in  the  state  may  be  represented  by  bonds 
held  in  a  few  financial  centres  outside  the  state,  and  may 
thus  entirely  escape  taxation. 

In  the  taxation  of  corporate  bonds  the  usual  method  is 
to  tax  the  individual  bondholders.  (See  page  216,  above.) 
But  in  a  few  states  the  bonds  are  assessed  directly  to  the 
corporation.49 

ART.  1.  THE  TAXABLE  VALUE  OF  THE  CORPORATE  CAPITAL  IS 
REPRESENTED  BY  THE  COMBINED  VALUE  OF  THE  SHAHES  OF 
STOCK  AND  OUTSTANDING  BONDS. 

It  would  seem  that  this  method  of  taxation  is  open  to  legal 
objection  if  it  includes  the  value  of  foreign-held  bonds.  Such 
a  tax  has  however  been  upheld,50  on  the  ground  that  it  is  a  tax 
on  the  corporate  property,  and  that  the  bonds  are  not  directly 
taxed,  but  are  only  taken  as  a  criterion  for  determining  the 
total  value  of  the  corporate  property. 

Colorado,  L.  1902,  Ch.  3,  §§  60,  63,  1"  9. 

Illinois*1  K.  S.,Ch.  120,  §  3. 

Tennessee,  L.  1901,  Ch.  174,  §§  22,  23,  24. 

47  State  Tax  on  Foreign-held  Bonds,  15  Wall.  (U.  S.)  300. 

48  See  Title  C,  Art.  1,  Sec.  b,  Par.  2,  above,  and  note  34. 

49  For  a  fuller  discussion  of  the  taxation  of  corporate  bonds  see  E.  B. 
Seligman's  Essays  in  Taxation,  pp.  229-234. 

80  State  Board  of  Equalization  v.  People,  191  111.  528,  543,  and  cases 
cited  infra  note  51. 

81  Pacific  Hotel  Co.  v.  Lieb,  83  111.  602  ;  Ottawa  Glass  Co.  v.  McCabe, 
81  111.  556  ;  Distilling  Co.  v.  People,  161  111.  101,  105. 


Exemptions  from  Taxdtion.  239 


ART.  2.  THE  CORPORATION  PAYS  A  TAX  ON  THE  BONDS  HELD  BY 
RESIDENTS  AS  THE  AGENT  OF  SUCH  RESIDENT  HOLDERS,  AND 
IS  ENTITLED  TO  DEDUCT  THE  TAX  SO  PAID  FROM  THE  INTER. 
EST  ACCRUING  ON  THE  BONDS. 

Maryland,  P.  G.  L.,  Ch.  81,  §  87.  (And  the  bonds 
shall  be  presumed  to  belong  to  residents 
unless  the  bona  fide  owner  certifies  on 
oath  that  he  is  a  non-resident.) 

Pennsylvania,  Dig.  L.,  Taxation,  §§  8,  9. 

TITLE  E.  CERTAIN  CORPORATIONS  ARE  EXEMPT 
FROM  THE  GENERAL  PROPERTY  TAX. 

Such  exemption,  either  by  express  enactment  or  by  judicial 
construction,  is  usually  held  to  apply  also  to  the  capital  stock 
and  the  individual  shares  of  such  corporations. 

ART.  1.     PERMANENT    EXEMPTIONS. 
Sec.  a.    Corporations  not  for  pecuniary  profit. 

These  corporations  are  not  business  corporations,  but  may 
be  briefly  referred  to  in  passing.  The  corporations  so  ex- 
empted are  public  or  municipal  corporations,  and  corpora- 
tions for  religious,  charitable  or  educational  purposes  in 
substantially  all  the  states  and  territories.  In  some  states 
corporations  for  agricultural  purposes  are  also  exempt. 

Sec.  b.    Manufacturing  corporations. 

The  exemption  of  manufacturing  corporations  from  taxa- 
tion on  their  property  invested  in  the  business  of  manufac- 
turing is  upheld  either  by  express  constitutional  provision  or 
on  broad  grounds  of  public  policy.  In  addition  to  the  states 
here  enumerated  which  exempt  such  corporations  from  a 
property  tax,  other  states,  as  will  appear  in  Chapter  VII.,  ex- 
empt such  corporations  from  the  franchise  tax.  We  have 
also  seen  in  Title  B,  above,  that  several  states  which  tax 
other  business  corporations  on  their  capital  stock,  tax  manu- 
facturing corporations  on  their  personal  property  only, 
which  is  ordinarily  an  easier  form  of  taxation. 

Pennsylvania,  Dig.  L.,  Taxation,  §  520.     (But  they 
are  taxed  for  local  purposes.)'5'2 

«  Hawes  Mfg.  Co/s  Appeal,  24  W.  N.  C.  302. 


240  Digest  of  Corporation  Laws. 

Tennessee,  L.  1901,  Ch.  174,  §  23.  (On  articles 
manufactured  from  the  produce  of 
the  state.) 

West  Virginia,  Code,  Ch.  29,  §  43.  (On  articles 
manufactured  in  the  state  during 
the  year  and  remaining  unsold  at 
the  time  of  assessment.) 

ART.  2.    TEMPORARY  EXEMPTIONS. 

The  exemptions  apply  only  to  the  property  invested  in 
the  business.  Other  property  owned  by  the  corporations  is 
subject  to  taxation. 

Sec.  a.    Mining  corporations. 

Louisiana,  Constit.,  Art.  230.      (From  local  taxes  till 

January  1,  1910.) 
Maine,  R.  S.,  Ch.  6,  §  6.      (For  10  years  from  time 

of  opening.) 

Sec.  b.    Manufacturing  corporations  generally. 

Louisiana,^  Constit.,  Art.  230.  (From  local  taxes 
till  January  1,  1910.  Provided  not 
less  than  5  hands  are  employed.) 

Mississippi,  Code,  §  2744.  (Corporations  for  the 
manufacture  of  articles  of  use  in  a 
finished  state,  if  their  factories  were 
established  before  1900,  are  exempt 
for  10  years.) 

Sec.  c.    Beet-sugar  manufacturing  corporations. 

Iowa,  L.  1900,  Ch.  40.  (If  beets  raised  in  the 
state.  Till  January  1,  1910.) 

New  Mexico,  L.  1897,  Ch.  24.  (If  factories  erected 
before  1899,  exempt  for  5  years.) 

53  The  provision  applies  to  certain  specified  kinds  of  manufacturing 
only,  but  almost  everything  is  included :  textile  fabrics,  yarns,  ropes, 
cordage,  leather,  shoes,  harness,  saddlery,  hats,  clothing,  flour,  machin- 
ery, articles  of  tin,  copper  and  sheet  iron,  agricultural  implements  and 
furniture,  and  other  articles  of  wood,  marble  or  stone ;  soap,  stationery, 
ink  and  paper,  boat-building,  fertilizers  and  chemicals. 


Exemptions  from    Taxation.  241 

Wyoming,  R.  S.,  §  1762.  (If  75  per  cent,  of  beets 
are  grown  in  the  state,  exempt  for  10 
years.) 

Sec.  d.    Zinc-manufacturing  corporations. 

Wisconsin,  Stat.,  §  1038,  f  22.      (For  3  years.) 

Sec.  e.    Woolen-manufacturing  corporations. 

New  Mexico,  L.  1897,  Ch.  24.  (If  factories  erected 
before  1899,  exempt  for  5  years.) 

Sec.  f.    Cotton-manufacturing  corporations. 

Alabama**  L.  1901,  p.  2598,  §  4.  (Corporations 
organized  since  February  13,  1897, 
which  have  expended  prior  to  Febru- 
ary 13,  1902,  not  less  than  $50,000, 
are  exempt  from  state  and  local  taxes, 
on  their  personal  property  only,  until 
February  13,  1907.) 

Sec.  g.    Ship-building  corporations. 

Alabama**  L.  1901,  p.  2598,  §  5.  (If  plant  costing 
not  less  than  $500,000  is  erected  and 
operated  before  March  5,  1906,  the 
corporation  shall  be  exempt  from  state 
and  local  taxes,  on  personal  property 
only,  until  March  5,  1911.) 

64  The  local  authorities  may  also,  in  their  discretion,  remit  the  local 
taxes  on  all  property  used  in  the  business  of  any  cotton  or  woolen  man- 
ufacturing or  ship-building  corporation  for  not  more  than  5  years. 
Ibid.,  §  2. 

The  following  states  also  provide  that  towns  may  vote  to  exempt  any 
manufacturing  corporation  from  local  taxation  for  a  limited  period  :  — 
New  Hampshire,  P.  S.,  Ch.  54,  §  11.     (Not  over  10  years.) 
New  Jersey,  G.  L.  Boroughs,  §  124.     (Not  over  5  years.) 
Rhode  Island,  G.  L.,  Ch.  44,  §  4.     (Not  over  10  years.) 
Vermont,  Stat ,  §  365.     (Not  over  10  years.) 


242  Digest  of  Corporation  Laws. 

CHAPTER   VI. 

THE  GENERAL  PEOPERTY  TAX  ON  FOREIGN  AND  NON- 
RESIDENT DOMESTIC  CORPORATIONS, 


TITLE  A.     THE    TAX    ON    RESIDENT    FOREIGN    COR- 
PORATIONS. 

The  statutory  provisions  for  the  taxation  of  foreign  cor- 
porations are  very  meagre.  The  application  of  the  tax  law 
to  foreign  corporations  is  in  a  large  measure  left  to  inference 
or  conjecture.  Usually  the  statutes  merely  prescribe  that  all 
property  in  the  state  shall  be  taxed,  or  use  some  equally 
broad  definition  of  the  property  subject  to  taxation,  and  leave 
it  to  the  courts  to  determine  how  far  these  general  provisions 
apply  to  foreign  corporations  and  how  far  such  provisions  are 
qualified  by  the  fact  that  the  taxing  power  of  each  state,  like 
any  other  incident  of  its  sovereignty,  is  limited  to  its  own 
jurisdiction.55 

In  order  to  give  such  jurisdiction  either  the  property 
assessed  or  its  owner  or  both  must  be  within  the  state.  In 
the  case  of  a  foreign  corporation  the  state  has  no  jurisdiction 
over  it  as  an  artificial  person.  It  is  not  strictly  a  citizen  of 
any  state,  but  its  legal  domicile  is  in  the  state  which  created 
it,  and  though  it  may  extend  its  operations  to  other  states,  it 
retains  the  domicile  of  its  birth.56  As  the  status  of  a  foreign 
corporation  is  therefore  practically  that  of  a  non-resident,  a 
state  can  acquire  jurisdiction  of  the  property  of  a  foreign 
corporation  only  in  so  far  as  such  property  is  capable  of  hav- 
ing a  legal  situs  independent  of  the  domicile  of  its  owner.57 

The  question  of  the  legal  situs  of  personal  property  has 
occasioned  a  great  variety  of  judicial  opinion.  The  primary 
question  is  whether  the  situs  of  such  property  is  where  the 
property  itself  is  or  where  its  owner  is.  In  regard  to  the 

66  St.  Louis  v.  Ferry  Co,  11  Wall.  (U.  S.),  423,  430. 

66  Boston  Investment  Co.  v.  Boston,  158  Mass.  461,  and  cases  cited; 
New  York  Biscuit  Co.  v.  Cambridge,  161  Mass.  326  ;  Paving  Co.  v.  City, 
41  La.  Ann.  1015 ;  R.R.  Co.  v.  Koontz,  104  U.  S.  11 ;  County  of  Yuba  v. 
Pioneer  Gold  Mine,  32  Fed.  Rep.  183. 

67  Yost  v.  Lake  Erie  Transp.  Co.,  112  Fed.  Rep.  746;  Boston  Invest- 
ment Co.  v.  Boston,  158  Mass.  461. 


The  Property  Tax  on  Foreign  Corporations.  243 

transfer  or  devise  of  personal  property,  the  common  law  rule 
is  that  personalty  follows  the  owner  and  is  governed  by  the 
law  of  his  domicile.  But  that  rule  "was  never  of  universal 
application  and  seldom  interfered  with  the  right  of  taxation."58 
It  is  merely  a  "legal  fiction  adopted  from  considerations 
of  general  convenience  and  policy  .  .  .  and  is  to  be  re- 
ceived and  understood  with  this  limitation,  that  there  is 
no  positive  law  of  the  country  where  the  property  is  in 
fact  which  contravenes  the  law  of  the  owner's  domicile ;  for 
if  there  is,  the  law  of  the  owner's  domicile  must  yield  to 
the  law  of  the  state  where  the  property  is  in  fact  situate."59 
It  is,  therefore,  within  the  power  of  the  states  to  declare,  as 
they  practically  all  have  declared  in  some  form  or  other,  that 
all  property  in  the  state,  real  and  personal,  shall  be  subject 
to  taxation.  This  has  generally  been  construed  by  the 
courts  to  mean  all  property  that  has  an  actual  physical 
situs  in  the  state. 

The  question  of  the  taxation  of  the  property  of  foreign 
corporations  within  the  state  is  the  converse  of  the  taxation  of 
the  property  of  domestic  corporations  or  other  residents 
without  the  state.  (See  page  220,  above.)  The  same  legal 
principles  should  apply  in  both  cases.  If  a  state  authorizes 
the  taxation  of  personal  property  owned  by  its  residents 
outside  the  state  it  recognizes  the  principle  that  personalty 
follows  the  owner  and  would  seem  thereby  to  have  estopped 
itself  from  taxing  similar  property  in  the  state  owned  by 
non-residents  or  foreign  corporations.  But  such  is  not 
always  the  case.  The  state  is  apt  to  insist  on  the  full  exer- 
cise of  its  taxing  powers,  and  is  little  troubled  by  questions 
of  consistency.  It  has  jurisdiction  over  all  persons  residing 
in  the  state,  and  may  tax  them  for  all  their  personal  property 
wherever  situated.  It  also  has  jurisdiction  over  all  property 
situated  in  the  state  without  reference  to  the  owner's  resi- 
dence. It  may,  therefore,  assess  such  property  and,  if 
necessary,  may  levy  on  the  property  itself  in  order  to  satisfy 
the  assessment. 

59  Adams  Express  Co.  v.  Ohio,  166  U.  S.  224. 

59  Catlin  v.  Hull,  21  Vt,  152,  159,  cited  in  New  Orleans  v.  Stempel,  175 
U.  S.  309. 


244  Digest  of  Corporation  Laws. 

The  legal  right  of  the  state  to  assess  any  property  is  not 
in  any  way  affected  by  the  fact  that  some  other  state  may 
also  have  the  right  to  assess  the  same  property.  The  taxa- 
tion of  the  same  property  by  competing  authorities  is  not 
double  taxation  in  the  sense  in  which  such  taxation  is  ex- 
pressly or  impliedly  prohibited  in  the  state  constitutions. 
Some  states,  on  equitable  grounds  and  on  the  ground  of 
comity  towards  sister  states,  have  shown  some  restraint  in 
the  exercise  of  their  taxing  power,  but  in  general  the  system 
of  taxation  in  each  state  makes  no  allowance  for  the  con- 
flicting claims  of  other  jurisdictions. 

As  we  have  already  stated,  the  principle  of  taxing  non- 
residents and  foreign  corporations  on  all  their  personal  prop- 
erty actually  located  in  the  state  has  been  adopted  with 
practical  uniformity  throughout  the  states.  Such  a  rule  is 
not  only  the  most  favorable  to  the  taxing  state,  but  it  is 
recommended  by  considerations  of  common  sense.  The 
practical  application  of  this  rule,  however,  is  not  always 
clear,  and  the  decisions  are  not  uniform.  The  right  of  tax- 
ing all  tangible  or  corporeal  property  having  a  permanent,  or 
at  least  something  more  than  a  temporary,  situs  in  the  state 
is  affirmed  in  almost  all  the  states.  But  it  is  more  difficult 
to  conceive  of  intangible  property  as  having  an  actual  situs 
apart  from  the  residence  of  the  owner.  Many  states  there- 
fore either  by  statute  or  by  judicial  decision  confine  the  tax- 
ation of  foreign  corporations  to  their  tangible  property.  But 
in  other  states  it  has  been  held  that  if  the  intangible  property 
can  be  found  within  the  state  in  a  concrete  form,  such  as 
bank  bills,  municipal  bonds  or  mortgages,  it  is  subject  to  tax- 
ation.60 Credits  connected  with  or  resulting  from  business 
done  within  the  state  have  also  been  held  liable  to  taxation.61 

ART.   1.     THE    TAX    OX    THE    REAL    ESTATE    OF    FOREIGN    CORPO- 
RATIONS. 

Real  estate  is  universally  regarded  as  having  its  situs  where 
it  is  located.  The  real  estate  owned  by  foreign  corporations 
and  situated  within  the  state  is  therefore  subject  to  taxation 
in  all  the  states  and  territories  in  the  same  manner  as  the 
real  estate  of  domestic  corporations. 

80  New  Orleans  v.  Stempel,  175  U.  S.  309,  322,  and  cases  cited. 

61  People  ex  rcl.  Armstrong,  etc.,  Co.  v.  Barker,  31  App.  Div.  (N.  Y.)  263, 


The  Property  Tax  on  Foreign  Corporations.  245 


ART  2.  THE  TAX  ON  THE  SEPARATE  ITEMS  OF  CORPORATE  PER- 
SONAL PROPERTY  WITHIN  THE  STATE. 

In  some  states  there  is  an  express  provision  for  the  taxa- 
tion of  the  personal  property  of  foreign  corporations.62  IfT 
other  states  such  property  is  not  expressly  declared  subject 
to  taxation,  but  the  law  providing  for  the  taxation  of  personal 
property  is  broad  enough  to  include  the  personal  property  of 
foreign  corporations.  Thus  there  is  provision  for  the  taxa- 
tion of  the  personal  property  of  all  corporations  doing  busi- 
ness in  the  state63  or  of  the  personal  property  of  non-residents 
within  the  state,64  or  of  all  goods,  chattels  and  effects  in  the 
state,65  or  of  all  goods,  chattels,  moneys  and  effects  whereso- 
ever they  are,06  or  of  all  property  in  the  state,67  or  of  all 
property  within  the  jurisdiction  of  the  state,68  or  of  all  per- 
sonal property,69  without  any  restriction  on  account  of  non- 
resident ownership. 

But  even  if  the  intangible  property  is  expressly  included, 
the  courts,  on  the  principles  already  stated,  will  generally 
restrict  the  tax  to  such  property  as  maybe  found  in  some 
concrete  form  within  the  state. 


Sec.  a.  Corporations  so  assessed  pay  no  additional  property 
tax  on  their  capital  stock,  and  shareholders  are  exempt 
from  any  tax  on  their  shares. 

This  form  of  taxation  is  the  one  employed  for  domestic 
corporations  in  the  states  named,  and  as  it  seems  equally 

62  Colorado,  Georgia,  Iowa,  Louisiana,  Missouri,  New  Jersey,  Ohio, 
Oregon,  Rhode  Island,  Tennessee,  Utah,  Wyoming.    The  citations  for 
the  various  states  are  given  in  the  appropriate  place  in  the  text. 

63  Idaho,  Mississippi,  Montana,  Nevada,  North  Dakota. 

64  Maryland,  West  Virginia. 

65  Michigan. 
68  Maine. 

67  Arizona,  Arkansas,  California,  Connecticut,  Florida,  Kansas,  Ken- 
tucky, Illinois,  Indian  Territory,  Massachusetts,  Nebraska,  New  Hamp- 
shire, New  Mexico,  New  York,  Oklahoma,  South  Carolina,  Washington, 
Wisconsin. 

68  Indiana. 

69  Alabama,  Delaware,  District  of  Columbia,  Minnesota,  North  Caro- 
lina, South  Dakota,  Texas,  Vermont,  Virginia. 


246  Digest  of  Corporation  Laws. 

adapted  to  the  taxation  of  foreign  corporations  doing  busi- 
ness in  the  state,  we  should  expect  to  find,  as  we  do  find, 
that  it  applies  to  such  foreign  corporations  also. 

Though  some  states  which  exempt  the  shares  of  domestic 
corporations  do  not  show  an  equal  readiness  to  exempt  the 
shares  of  foreign  corporations,  it  would  seem  that  the  shares 
of  resident  foreign  corporations  are  exempt  in  the  states  here 
listed.  All  of  these  states  which  provide  that  manufacturing 
or  other  specified  resident  corporations  shall  be  taxed  in  the 
same  manner  as  individuals,  in  lieu  of  any  tax  on  the  capital 
stock  or  shares,  seem  to  include  resident  foreign  corpora- 
tions within  the  terms  of  such  provision.  In  the  other  states, 
as  a  rule,  all  shares  of  stock  are  declared  taxable,  but  this 
is  qualified  by  a  provision  exempting  the  shares  of  stock  in 
corporations  which  are  directly  taxed. 

The  provisions  in  the  various  states  which  we  have  con- 
strued as  granting  an  exemption  to  shares  of  stock  in  foreign 
corporations  doing  business  in  the  state  are  appended  to  the 
citations.  The  application  of  these  provisions  to  foreign 
corporations  carrying  on  only  a  portion  of  their  business 
in  the  state  does  not  seem  to  have  been  defined  by  the  courts 
in  these  states,  and  their  precise  effect  must  remain  to  some 
extent  a  matter  of  conjecture.  In  the  state  of  the  law  here 
described  the  courts  in  some  states  may  apparently  exercise 
their  discretion  in  interpreting  the  law  so  as  to  fit  the  circum- 
stances of  the  particular  case.  That  is  to  say,  while  these 
provisions  may  be  sufficient  to  exempt  the  shares  of  stock 
in  a  foreign  corporation  carrying  on  its  entire  business,  or  a 
substantial  part  of  its  business  in  the  state,  it  would  probably 
be  held  that  they  did  not  apply  to  a  foreign  corporation 
which  carries  on  only  an  insignificant  portion  of  its  business 
in  the  state. 

The  only  attempt  thus  far  made  to  define  the  law  in  this 
particular  is  shown  in  the  law  passed  at  the  last  session  of 
the  Ohio  Legislature.  This  law  provides  that  no  person  shall 
be  "  required  to  list  for  taxation  any  shares  of  the  capital 
stock  of  any  corporation,  whether  domestic  or  foreign,  if 
satisfactory  proof  is  furnished  that  two-thirds  or  more  of  the 
property  of  such  corporation  is  taxed  in  Ohio  and  the  re- 


The  Property  Tax  on  Foreign  Corporations.  247 

mainder  is  taxed  in  some  other  state  or  states  of  the  United 
States."70 

Until  the  example  of  Ohio  is  followed  by  the  enactment 
of  similar  laws  in  other  states,  the  application  of  the  present 
law  to  shares  of  stock  in  such  corporations  must  be  left  for 
the  determination  of  the  courts.  Meantime  any  statement 
of  the  existing  law  must  of  necessity  show  something  of 
the  vagueness  which  is  inherent  in  the  law  itself. 

It  may  be  well  to  point  out  that  the  word  capital  as  used 
in  the  following  citations  means  the  stock  in  trade  and  per- 
sonal property,  not  the  capital  stock. 

Arizona,  R.  S.  §  3837.  (All  property  of  corpora- 
tions shall  be  taxed,  but  no  assessment 
shall  be  made  of  shares.) 

Connecticut,  G.  S.,  §§  2328,  2329.  (Where  the 
whole  property  of  any  corporation  is 
taxed,  its  shares  of  stock  are  exempt.) 

District  of  Columbia,  U.  S/,  Stat.  1902,  Ch.  1352, 
§  6, 1T1F  2,  8.  (Newspaper,  real  estate, 
and  mercantile  corporations.  Only  tan- 
gible property  is  taxed.) 

Florida,  L.  1895,  Ch.  4322,  §§  1,  8.  (Where  the 
property  of  the  corporation  is  in  the 
state  and  taxes  are  paid  on  the  same, 
its  shares  of  stock  are  exempt.) 

Georgia,  Pol.  Code,  §§  767,  769;  L.  1900,  p.  21, 
§  8.  (The  only  shares  required  to  be 
listed  are  those  in  corporations  outside 
the  state  or  in  corporations  within  the 
state  where  capital  stock  or  property 
is  not  returned  for  taxation.) 

70  Ohio,  L.  1902,  p.  541.  This  provision  applies  to  shares  in  such 
foreign  corporations  only  as  pay  the  annual  franchise  tax.  Under  the 
previous  law,  a  provision  in  the  ordinary  form  that  shareholders  are  not 
taxable  on  the  shares  of  stock  of  any  corporation,  the  capital  stock  of 
which  is  taxed  in  the  name  of  such  corporation,  was  held  to  apply  to 
such  corporations  only  as  are  required  to  return  all  or  substantially  all 
their  property  for  taxation,  and  not  to  foreign  corporations  which  pay 
taxes  in  Ohio  only  on  the  portion  of  their  property  which  is  situated 
there.  Sturges  v.  Carter,  114  U.  S.  512. 


248  Digest  of  Corporation  Laws. 

Idaho,  Constit.,  Art.  7,  §  8  ;  Pol.  Code,  §§  1334, 
1347.  (Where  the  entire  capital  or 
property  of  the  corporation  is  assessed 
the  stockholders  must  not  be  taxed  on 
their  stock.) 

Illinois,  R.  S.,  Ch.  120,  §§  1,  3.  (Purely  manufac- 
turing, newspaper-publishing,  stock- 
breeding  and  coal-mining  corporations 
only.) 

Kansas,  G.  S.,  §§  7502,  7515,  7545.  (Manufactur- 
ing and  stock-yard  corporations.) 

Kentucky,11  L.  1902,  Ch.  128,  Art.  1,  §  2,  Art.  3, 
§  9.  (So  long  as  the  corporation  pays 
the  taxes  on  all  its  property  of  every 
kind,  the  shares  of  stock  are  exempt.) 

Maine,  R.  S.,  Ch.  6,  §§  5,  28.  (Manufacturing,  min- 
ing and  smelting  corporations  only.) 

Missouri,  R.  S.,  §§  1014,  9118.  (Where  the  prop- 
erty of  the  corporation  is  taxed,  the 
shares  are  exempt.  See  note  32.) 

Montana,  Constit.,  Art.  12,  §  7  ;  Civ.  Code,  §  3680. 
(Shares  of  stock  are  exempt  when,  the 
property  of  the  corporation  represented 
by  such  shares  is  in  the  state  and  is 
taxed.) 

Nevada,  Comp.  L.,  §§  1082,  1084,  1089.  (Stock- 
holders in  any  corporation  whose  capi- 
tal is  assessed  are  not  taxed  for  such 
stock.) 

New  Jersey,1'1  G.  L.,  Taxes,  §  79  ;  L.  1896,  Ch.  185, 
§  110.  (Tax  confined  to  property  lo- 
cated and  business  done  in  the  state.) 

71  In  view  of  this  provision,  the  item  in  the  tax  schedule  designated 
"  amount  of  stock  in  foreign  corporations  "  probably  applies  to  the  stock 
of  non-resident  foreign  corporations  only. 

72  As  foreign  corporations  are  included  in  the  provisions  of  the  corpo- 
ration act  of  1896  (L.  1896,  Ch.  185,  §  96),  the  exemption  of  the  share- 
holders in  domestic  corporations  (see  Jersey  City  Gas  Light  Co.  v. 
Jersey  City,  46  N.  J.  Law,  194)  applies  also  to  the  shareholders  in  for- 
eign corporations  doing  business  and  subject  to  taxation  in  the  state. 
See  Smith  v.  Ramsey,  54  N.  J.  L.  546. 


The  Property  Tax  on  Foreign  Corporations.  249 

New  York,™  G.  L.,  Ch.  24,  §§  3,  7,  11,  12.  (Taxed 
on  the  amount  of  capital  employed  in 
its  business  in  the  state.) 

Ohio™  Ann.  Stat.,  §  2744 ;  L.  1902,  p.  541.  (Stock- 
holders are  exempt  provided  two-thirds 
or  more  of  the  corporate  property  is 
taxed  in  Ohio  and  the  remainder  is 
taxed  in  another  state.) 

Oregon,  Ann.  L.,  §§  2731,  2744,  2750;  L.,  1901, 
p.  153.  (The  tangible  property  only 
is  taxed.  Stockholders  in  any  cor- 
poration which  is  taxed  on  its  capital 
are  not  taxed  for  such  stock.) 

South  Carolina,15  Code,  §§  260,  270,  273,  306. 

Texas™  K.  S.,  §§  5063,  5067,  5076;  G.  L.,  1897, 
Ch.  142.  (Only  stock  in  corporations 
out  of  the  state  is  taxable.) 

Utah,  Constit.,  Art.  13,  §  10;  R.  S.,  §§  2501,  2505, 
2528.  (The  stocks  of  any  corporation 
are  not  taxed  when  the  property  of 
such  corporation,  represented  by  such 
stocks,  has  been  taxed.) 

73  The  same  rule  applies  to  the  taxation  of  domestic  corporations  which 
transact  part  of  their  business  in  another  state.     But  before  a  foreign 
corporation  can  be  taxed,  it  must  not  only  employ  a  portion  of  its  capital 
in  the  state,  but  must  also  be  engaged  in  business  there.     Am.  Con.  & 
Dredging  Co.  v.  Wemple,  129,  N.  Y.  558.     See  also  People  v.  Equitable 
Trust  Co.,  96  N.  Y.  388;  People  v.  Horn  Silver  Mining  Co.,  105  N.  Y. 
76  ;  People  ex  rel.  So.  Cotton  Oil  Co.  v.  Wemple,  131  N.  Y.  64. 

74  The  tax  is  apparently  limited  to  tangible  property.    Cf.   Lee  v. 
Dawson,  8  Circ.  Ct.  (Ohio)  365.     See  also  note  70. 

75  Though  ordinary  domestic  corporations  are  apparently  subject  to  a 
tax  on  the  excess  value  of  their  capital  stock,  domestic  corporations 
owning  property  both  within  and  without  the  state  are  taxed  on  their 
property  within  the  state  instead  of  their  capital  stock,  and  the  indi- 
vidual shares  are  exempt  (§  304).     A  similar  method  of  taxation  is 
doubtless  applied  to  foreign  corporations  as  they  are  not  brought  directly 
within  the  constitutional  provision  for  the  taxation  of  the  share  value  of 
the  capital  stock. 

76  To  tax  the  shares  of  stock  when  all  the  property  which  gives  value 
to  such  shares  is  taxed  against  the  corporation  would  be  double  taxation. 
Gillespie  v.  Gaston,  67  Tex.  599. 


250  Digest  of  Corporation  Laws. 

Virginia,  L.  1900,  Chs.  796,  906.  (The  capital  and 
shares  of  stock  in  mercantile  corpora- 
tions which  are  taxed  under  the  occu- 
pation tax  are  exempt.  When  the 
corporate  capital  is  taxed  by  the  state 
of  Virginia,  the  shares  of  stock  shall 
not  be  further  taxed.) 

Washington,  Constit.,  Art.  7,  §§  1,  2,  3;  Code, 
§§  1657,  1664,  1671,  1676.  (Shares  of 
stock  are  taxable  only  when  the  prop- 
erty of  the  corporation  is  not  assessed 
in  the  state.) 

West  Virginia,  Code,  Ch.  29,  §§  51,  64.  (When 
the  corporate  capital  is  taxed  the  in- 
dividual shareholders  shall  not  be  taxed 
on  their  shares.) 

Wisconsin,  Stat.,  §§  1034,  1038,  Tl  9,  1040.  (Stock 
in  any  corporation  in  the  state  which  is 
taxed  on  its  property  is  exempt.) 

Sec.  b.  Resident  foreign  corporations  are  taxed  on  their 
property,  and  are  also  directly  taxed  by  a  capital 
stock  tax  on  their  corporate  excess. 

The  result  of  such  a  form  of  taxation  is  practically  to  sub- 
ject to  taxation  not  only  the  corporate  property  in  the  state, 
but  all  the  intangible  values  wherever  they  may  be.  This 
tax  is  not  in  line  with  the  ordinary  legal  principles  for  the 
taxation  of  the  intangible  property  of  non-residents,  and 
bears  with  particular  severity  upon  foreign  corporations 
which  are  obliged  to  pay  an  annual  franchise  tax  in  the 
home  state. 

In  the  case  of  foreign  corporations  doing  business  in 
several  states,  the  courts  have  held  that  the  intangible  values 
represented  by  the  assessment  of  the  capital  stock  should  be 
apportioned  to  the  various  states  on  the  basis  of  the  prop- 
erty located  and  business  done  in  each.77  It  would  seem 
that  such  a  construction  of  the  law  is  demanded  both  on  legal 

77  Cf .  Adams  Express  Co.  v.  Ohio,  166  U.  S.  185 ;  Wells  Fargo  Express 
Co.  v.  Crawford  Co.,  63  Ark.  576 ;  Commonwealth  v.  Standard  Oil  Co., 
101  Pa.  119,  132.  This  method  of  assessment  is  also  expressly  author- 
ized by  the  Colorado  statute  (L,  1902,  Ch.  3,  §  63). 


Tax  on  Corporate  Excess  of  Foreign.       251 

and  equitable  grounds  in  all  the  states  where  this  tax  is 
levied. 

In  some  states  there  is  no  express  provision  for  levy- 
ing this  form  of  tax  on  foreign  corporations,  but  the  law 
as  a  whole  seems  broad  enough  to  include  them.  Such 
states  are  given  below,  subject  to  the  reservation  that  the 
practice  may  be  found  in  some  cases  not  to  conform  to  the 
construction  of  the  law  here  given. 

In  the  assessment  of  the  corporate  excess  the  same  deduc- 
tions are  allowed  as  in  the  case  of  domestic  corporations. 

Arkansas,  Stat.,  §§  6401,  6402,  6428,  6462. 

California™  Constit.,  Art.  12,  §  5,  Art.  13,  §  1; 
Pol.  Code,  §§  3607,  3608,  3629,  3641. 

Colorado,  L.  1902,  Ch.  3,  §§  60-63.  (Foreign 
corporations  are  expressly  included. 
See  note  76.) 

District  of  Columbia,  U.  S.  Stat.  1902,  Ch.  1352, 
§  6,  1[  8.  (With  the  exception  of 
newspaper,  real  estate  and  mercantile 
corporations,  foreign  corporations  or- 
ganized chiefly  for  the  purpose  of 
transacting  business  in  the  District  of 
Columbia  are  taxed  in  the  same  man- 
ner as  domestic  corporations.) 

Indian  Territory,  Stat,,  §§  4900,  4901,  4927,  4960. 

Kansas,  G.  S.,  §§  7159,  7172.  (Except  manufac- 
turing and  stock-yard  corporations.) 

Louisiana,  L.  1898,  No.  170,  §§  7,  17,  28.  (Resi- 
dent foreign  corporations  are  appar- 
ently taxed  in  the  same  manner  as 
domestic.  See  note  27.) 

8  The  tax  on  corporate  excess  is  levied  under  the  provision  in  the 
Constitution  for  the  taxation  of  corporate  franchises.  See  note  25.  The 
courts  have  held  that  the  privilege  of  doing  business  as  a  corporation  is 
a  franchise  within  the  terms  of  the  constitutional  provision.  Possibly 
the  franchise  of  foreign  corporations  is  exempt  on  the  theory  that  it  is 
subject  to  taxation  by  the  granting  state.  It  would  seem,  however,  that 
the  privilege  enjoyed  by  a  foreign  corporation  oJ  exercising  its  corpo- 
rate privileges  in  the  state  comes  within  the  judicial  definition  of  the 
tax  on  the  corporate  franchise.  The  shares  of  stock  in  such  corpora- 
tions are  not  taxed. 


252  Digest  of  Corporation  Laws. 

Michigan™  Comp.  L.,  §§3831,  ff  3,  9,  3837,  3842, 
7067.  (The  exemption  of  shares  of 
stock  in  manufacturing  corporations 
apparently  applies  to  domestic  corpo- 
rations only.) 

Missisxijuri,  Constit.,  §§  181,  182;  Code,  §§  3749, 
3750,  3758.  (Returns  in  regard  to 
the  value  of  the  capital  stock  are  re- 
quired from  all  corporations.  See  also 
note  28.) 

Tennessee,  L.  1901,  Ch.  174,  §§  8,  22,  23,  24. 
(Foreign  corporations  are  expressly 
included.) 

Wyoming™  R.  S.,  §§  1763,  1774,  1779. 

79  Returns  as  to  the  value  of  the  capital  stock,  and  items  of  deduction 
are  required  from  all  corporations.    But  the  assessment  schedule  pro- 
vides for  the  listing  of  "all  shares  of  stock  in  foreign  corporations 
owned  by  citizens  of  this  state."    This  leaves  the  meaning  of  the  law 
somewhat  uncertain.    In  Graham  v.  Township  St.  Joseph,  67  Mich.  655, 
it  is  held  that  shares  of  stock  in  a  foreign  corporation  whose  property  is 
not  taxable  in  the  state  are  taxable  to  the  individual  holders,  and  it  is 
also  declared  obiter  that  if  the  corporate  property  is  taxable  in  the  state 
the  shares  of  stock  are  exempt.     As  the  tax  on  the  corporate  excess  is 
by  the  statute  expressly  termed  a  tax  on  the  corporate  property,  this  deci- 
sion is  consistent  with  the  taxation  of  the  property  of  foreign  corpora- 
tions by  means  of  a  tax  on  the  corporate  excess. 

80  All  real  and  personal  property  in  the  state,  of  every  kind,  belong- 
ing to  foreign  corporations,  is  declared  taxable.    All  corporations  doing 
business  in  the  state  are  also  assessed  on  their  paid-in  capital  stock  and 
surplus,  less  real  estate  without  the  state.    This  is  qualified  by  a  provi- 
sion that  domestic  corporations  shall  be  assessed  on  their  property  like 
individuals,  but  their  capital  stock,  as  it  simply  represents  the  interests 
of  the  owners  in  the  corporate  property,  shall  not  be  taxed.     By  the 
terms  of  the  statutes,  therefore,  foreign  corporations  would  seem  to  be 
subject  to  taxation  both  on  their  property  and  capital  stock,  less  real 
estate  in  another  state.    But  the  principle  recognized  by  the  Legislature 
in  exempting  the  capital  stock  of  domestic  corporations  seems  equally 
applicable  to  resident  foreign  corporations,  and  there  is  little  doubt 
that  the  latter  would  be  allowed  a  similar  exemption  if  the  issue  should 
be  raised  in  the  courts. 


Tax  on  Property  and  Shares  of  foreign.    253 


Sec.  c.  Resident  foreign  corporations  are  taxed  on  the  full 
amount  of  their  capital  stock  in  lieu  of  any  tax 
on  the  corporate  property. 

This  tax  must  be  understood  to  be  restricted,  to  the  same 
extent  as  the  tax  on  corporate  excess,  to  the  proportion  o~f 
the  capital  stock  represented  by  property  located  and  busi- 
ness done  in  the  state.81  Shares  of  stock  in  corporations  so 
taxed  are  exempt. 

.Yew  Mexico,812  Comp.  L.,  §§  4018,  4024,  4028. 
Pennsylvania,*1  Dig.  L.,  Taxes,  §  2.     (Foreign  cor- 
porations are  expressly  included.) 

Sec.  d.  Resident  foreign  corporations  are  directly  taxed  on 
their  property  only,  but  the  corporate  excess  is 
assessed  ratably  to  the  individual  shareholders. 

Par.  1.    Such  tax  is  paid  directly  by  the  shareholders. 

Maine,  E.  S.,  Ch.  6,  §§  2,  5,  14,  f  3.  (Except 
manufacturing,  mining  and  smelt- 
ing corporations.) 

Minnesota,  Stat.,  §§1508,  1524,  1530.  (The  tan- 
gible property  only  is  assessed 
directly  to  the  corporation.  See 
note  17.) 

New  Hampshire,  Constit.,  Art.  5;  P.  S.,  Ch.  55, 
§§  2,  9,  Ch.  58,  §  1.  (But  shares 
not  drawing  dividends  are  not 
taxed.) 

North  Dakota,  L.  1897,  Ch.  126,  §§  2,  15,  25. 

Rhode  Island,  G.  L.,  Ch.  45,  §§  9,  10,  Ch.  46,  §§  6, 
11,  12.  (Apparently  the  tangible 
property  only  is  assessed  to  the 
corporation . ) 


s;  See  Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  119,  132. 

82  Resident  foreign  corporations  seem  to  be  taxed  in  the  same  manner 
as  domestic.  The  tax  is  termed  a  tax  on  the  corporate  property,  but, 
while  the  statute  is  not  clear,  it  seems  to  provide  for  a  tax  on  such  prop- 
erty at  the  share  value.  See  note  36. 


254  Digest  of  Corporation  Laws. 

/South  Dakota,  Constit.,  Art.  11,  §  2;  Ann.  Stat., 
§  §  2134, 2137, 2139, 2142, 2142 g, 
2150,  2154. 

Vermont,  Stat.,  §§  374,  378,  380,  383,  384. 

Par.  2.  Such  tax  is  collected  from  the  corporation  as  the  agent  of 
its  shareholders,  and  the  tax  so  paid  is  a  lien  on  the  shares. 

Alabama,  Civ.  Code,  §  3911 ;  L.  1901,  p.  2598,  §  6. 
(Foreign  corporations  are  ex- 
pressly included.) 

Maryland,  P.  G.  L.,  Ch.  81,  §§  2,  141,  178;  L. 
1896,  Ch.  120;  L.  1902,  Ch.  468. 
(But  shares  not  drawing  dividends 
are  not  taxed.) 

Sec.  e.  Resident  foreign  corporations  are  directly  assessed 
on  their  property  only,  but  their  shares  of  stock 
are  assessed  at  their  full  value  to  the  individual 
holders. 

Par.  1.    Where  a  similar  method  of  taxation  is  employed  for  do- 
mestic corporations. 

Delaware,  L.  1898,  Ch.  25.  (A  tax  on  investments 
is  the  only  property  tax  paid  by  cor- 
porations.) 

Oklahoma,  Stat.,  §§  5577,  5580,  5584,  5596;  L. 
1899,  p.  217. 

Par.  2.  Though  domestic  corporations  are  directly  taxed  both  for 
their  property  and  corporate  excess,  while  the  individual 
shareholders  are  exempt,  foreign  corporations  are  directly 
assessed  on  their  property  only,  and  the  full  value  of  the 
shares  is  assessed  to  the  individual  holders. 

If  the  identity  of  the  corporate  property  and  shares  of 
stock  as  subjects  of  taxation  is  admitted,  this  form  of  tax 
permits  double  taxation  to  a  greater  extent  in  the  case  of 
foreign  than  of  domestic  corporations.  These  states,  how- 
ever, have  recognized  the  injustice  and  doubtful  legality  of 
assessing  foreign  corporations  directly  for  the  full  share 
value  of  their  capital  stock  through  the  machinery  of  the  tax 
on  corporate  excess,  and  have  considered  it  better  to  tax  the 
shares  of  such  corporations  to  the  individual  holders,  rather 
than  allow  all  the  intangible  values  of  such  corporations  to 
escape  taxation.  It  is  recognized  that  such  a  system  of  tax- 


Tax  on  Property  and  Shares  of  Foreign.    255 

ation  is  merely  a  makeshift  and  not  wholly  defensible  on 
economic  grounds,  but  it  is  regarded  as  being  on  the  whole 
as  fair  and  equitable  as  any  other  system  that  can  be  devised. 

Illinois®  R.  S.,  Ch.  120,  §§  1,  25,  T  29.  (Foreign 
corporations  can  be  directly  taxed  oTT 
their  tangible  property  only.  The 
shares  of  stock  in  manufacturing, 
newspaper-publishing,  stock-breed- 
ing and  coal-mining  corporations  are 
apparently  exempt,  but  the  shares 
of  all  other  foreign  corporations  are 
taxable.) 

Indiana  ^  Ann.  Stat.,  §§  8410,  8411.  (There  is  no 
authority  to  tax  foreign  corporations 
on  their  stock  excess,  but  all  shares 
in  foreign  corporations  owned  by 
residents  are  taxable.) 

Iowa,85  Code,  §§  1308,  1323.  (All  property  in  the 
state  belonging  to  foreign  corpora- 
tions is  taxable.  Only  domestic 
corporations  are  required  to  return 
their  corporate  excess  for  taxation. 
Corporation  stocks  not  otherwise 
assessed  or  exempted  are  taxed.) 

Massachusetts,86  R.  L.,  Ch.  12,  §§4,  23.  (Foreign 
corporations  are  taxed  on  their 
tangible  property  only,  and  resident 
shareholders  are  taxed  on  the  full 
value  of  their  shares  of  stock.) 

Nebraska,  Comp.  Stat.,  §§  4282,  4288,4313.  (The 
shares  of  stock  of  corporations  and 
the  capital  stock  of  domestic  corpo- 
rations are  taxable.) 

83  W.  U.  Tel.  Co.  v.  Lieb,  76  111.  172;  Postal  Tel.  Co.  v.  Barnard,  37 
111.  App.  105 ;  Porter  et  al  v.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  76  111.  561. 

84  Riley  v.  W.  U.  T.  Co.,  47  Ind.  511, 

85  The  exemption  of  shares  of  stock  in  manufacturing  corporations 
seems  to  apply  to  domestic  corporations  only.    Code,  §  J319. 

86  Boston  Investment  Co.  v.  Boston,  158  Mass.  461 ;  New  York  Biscuit 
Co.  v.  Cambridge,  161  Mass.  326  ;  Dwight  v.  Boston,  12  Allen,  316. 


256  Digest  of  Corporation  Laws. 

North  Carolina,  L.  1901,  §§  6,  7,  23.  (Shares  of 
stock  are  taxable.  Domestic  corpo- 
rations only  are  required  to  return 
the  excess  value  of  their  capital 
stock  for  taxation.) 

TITLE  B.     THE    TAX    ON    NON-RESIDENT    DOMESTIC 
AND   FOREIGN   CORPORATIONS. 

ART.  1.  SHARES  OF  STOCK  IN  SUCH  CORPORATIONS  ARE  TAXED 
IN  THE  HANDS  OF  RESIDENT  HOLDERS. 

No  domestic  or  foreign  corporation  whose  entire  business 
is  transacted  and  whose  entire  property  is  located  in  another 
state  can  be  directly  reached  for  taxation  under  the  general 
property  tax.  But  its  shares  of  stock  in  the  hands  of  resi- 
dent holders  are  generally  held  to  be  within  the  jurisdiction 
of  the  state  and  subject  to  taxation.  On  the  theory  that  the 
taxation  of  shares  of  stock  is  a  part  of  the  scheme  of  corpo- 
rate taxation  the  inclusion  of  this  title  is  justified. 

Most  of  the  states  provide  that  shares  of  stock  are  taxable, 
but,  as  we  have  already  pointed  out,  this  provision  is  com- 
monly qualified  by  an  exemption  of  the  shares  of  stock  when 
the  corporate  property  is  taxed  in  the  state.  In  the  case  of 
non-resident  corporations  this  exemption  does  not  apply,  and 
the  shares  of  stock  remain  subject  to  taxation. 

For  the  purposes  of  the  general  property  tax,  the  distinc- 
tion between  resident  and  non-resident  corporations  is  of 
more  importance  than  that  between  domestic  and  foreign 
corporations.  The  location  of  the  property  rather  than  the 
place  of  corporate  origin  is  the  governing  principle.  In  the 
case  of  non-resident  corporations  where  this  principle  is  less 
affected  by  interstate  complications,  and  where  the  taxing 
state  is  not  brought  into  direct  relation  with  the  corpora- 
tions, but  taxes  their  shares  simply  as  personal  property 
owned  by  residents,  the  question  whether  such  corporations 
are  domestic  or  foreign  is,  as  a  rule,  immaterial.  In  either 
case,  if  the  corporate  property  is  not  in  the  state,  the  shares 
of  stock  must  be  taxed.87 

87  See  Lander  v.  Burke,  65  Ohio  St.  532 ;  Sturges  v.  Carter,  114  U.  S. 
512. 


Tax  on  Shares,  Non-resident  Corporations.  257 

But  while  this  would  seem  to  be  the  fair  construction  of 
the  statutes,  the  assessment  schedule  in  Illinois,  Indiana, 
Kentucky,  Maryland,  Michigan  and  Minnesota  contains  a 
specific  entry  for  shares  of  stock  in  foreign  corporations 
only.  It  is  idle  to  speculate  whether  this  is  an  intentional 
discrimination  in  favor  of  shares  in  non-resident  domestic 
corporations  on  grounds  of  state  policy  or  whether  the  in- 
tention of  the  Legislature  has  been  defeated  by  an  inaccurate 
use  of  language.  Under  such  a  method  of  listing,  shares  of 
stock  in  non-resident  domestic  corporations,  though  tech- 
nically subject  to  assessment  as  "other  property"  must  in 
practice  largely  escape  taxation. 

With  this  exception,  the  shares  of  non-resident  domestic 
corporations  would  seem  to  be  taxable  equally  with  those  of 
foreign  corporations  in  the  following  states  :  — 

Alabama,  Civ.  Code,  §  3911 ;  L.  1901,  p.  2598,  §  6. 

Arkansas,  Stat.,  §  6402. 

California,®1  Constit.,  Art.  13,  §  1. 

Delaware,  L.  1898,  Ch.  25,  §  2. 

Florida,  L.  1895,  Ch.  4322,  §§  1,  3. 

Georgia,  Code,  §  767;  L.  1898,  p.  21,  §  16,  IF  30. 

Idaho,  Code,  §§  1313,  1334. 

Illinois,™  R.  S.,  Ch.  120,  §§  1,  25,  f  29. 

Indiana,™  Ann.  Stat.,  §  8411. 

Indian  Territory,  Stat.,  §  4901. 

Iowa,  Code,  §  1308. 

Kansas,  G.  S.,  §§  7502,  7503,  7515. 

Kentucky,  L.  1902,  Ch.  128,  Art.  1,   §§  2,  4,  Art. 

2,  §  16. 

Louisiana,  L.  1902,  No.  130,  §  5. 
Maine,  R.  S.,  Ch.  6,  §  5. 
Maryland,  P.  G.  L.,  Ch.  81,  §  2. 
Massachusetts,  R.  L.,  Ch.  12,  §  4,  Ch.  14,  §  61. 
Michigan,*1  Comp.  L.,  §  3831,  1"  9. 

88  San  Francisco  v.  Fry,  63  Cal.  470 ;  San  Francisco  v.  Mackay,  22  Fed. 
Rep.  605 ;  Standford  v.  City  of  San  Francisco,  131  Cal.  34. 

89  Porter  v.  R.  R.  I.  &  St.  L.  R.R.  Co.,  76  111.  561. 
80  Seward  v.  City  of  Rising  Sun,  79  Ind.  561. 

91  Graham  v.  Township  St  Joseph,  67  Mich.  655, 


258  Digest  of  Corporation  Laws. 

Minnesota,  Stat.,  §§  1510,  1515,  1524,  T  25. 

Mississippi,  Code,  §  3751. 

Missouri,™  ~R.  S.,  §  9123. 

Montana,  Civ.  Code,  §  3680. 

Nebraska,  Comp.  Stat.,  §§  4282,4288. 

Nevada,  Comp.  L.,  §§  1081,  1082,  1089. 

New  Mexico,  Comp.  L.,  §  4028. 

North   Carolina,^  Constit.,  Art.  5,   §  3  ;    L.   1901, 

Ch.  7,  §  23. 

North  Dakota,  L.  1897,  Ch.  126,  §§  4,  15. 
OAto,9*  Ann.  Stat.,  §§  2731,  2746. 
Oklahoma,  Stat.,  §§  5577,  5580.   • 
Oregon,  Ann.  L.,  §§  2731,  2750. 
Pennsylvania,^  Dig.  L.,  Taxation,  §  28. 
/SbwtfA  Carolina,  Code,  §§  265,  266. 
South  Dakota,  Constit.,  Art.  11,   §  4;  Ann.  Stat., 
§§  2134,  2142. 

Tennessee,  L.  1901,  Ch.  174,  §  8. 
,  R.  S.,  §  5063. 
,  Constit.,  Art.  13,  §  2  ;  R.  S.,  §  2505. 

Virginia*  L.  1890,  Ch.  244,  §  8  ;  L.  1898,  Chs.  75, 
342. 

Washington,  Code,  §§  1657,  1664. 

West  Virginia,  Code,  Ch.  29,  §§  47,  51. 

Wisconsin,  Stat.,  §§  1034,  1036,  1038,  If  9. 

Wyoming,  K.  S.,  §§  1763,  1774. 


ART.    2.     THE    SHARES    OF    STOCK  IN    SUCH    CORPORATIONS    ARE 
EXEMPT  FROM   TAXATION. 

Sec.  a.    No  provision  is  made  for  the  taxation  of  individual 
shares  of  stock  of  any  kind. 

In  these  states  all  property  in  the  state  is  taxed,  and  it  is 
assumed  that  the  value  of  all  shares  of  stock,  in  so  far  as 

92  Ogden  v.  City  St.  Joseph,  90  Mo.  522. 

93  Worth  v.  Commrs.  of  Ashe,  82  N.  C.  420. 

94  Bradley  v.  Bauder,  36  Ohio  St.  28  ;  Lander  v.  Burke,  65  Ohio  St.  532. 

95  Whitesell  v.  Co.  of  Northampton,  49  Pa.  St.  526  ;  McKeen  v.  Co.  of 
Northampton,  49  Pa.  St.  519. 

98  Jennings  v.  Commonwealth,  98  Va.  80. 


Shares  Non-resident  Corporations  Exempt.  259 

such  shares  represent  corporate  property  within  the  taxing 
jurisdiction  of  the  state,  has  already  been  assessed  through 
a  direct  tax  on  the  corporation. 

Arizona,  R.  S.,  §  3837.  (All  corporate  property 
shall  be  assessed,  but  no  assess- 
ment shall  be  made  of  shares.) 

Colorado™  L.  1902,  Ch.  3,  §§  13,  14.  (Shares  of 
stock  are  not  specifically  men- 
tioned in  the  enumeration  of  tax- 
able property.) 

District  of  Columbia,  U.  S.  Stat.  1902,  Ch.  1352, 
§  6,  If  2.  (Tangible  personalty 
only  is  subject  to  taxation.) 


Sec.  b.    Shares  of  stock  in  non-resident  corporations  which 
are  taxed  in  another  state  are  exempt. 

The  following  states  impose  a  voluntary  check  on  their 
constitutional  taxing  authority,  by  recognizing  the  taxation 
imposed  by  other  states  and  adjusting  their  own  system  so 
as  to  avoid  double  taxation  of  the  same  property  through  a 
conflict  of  jurisdiction. 

Connecticut,^  G.  S.,  §  2323.  (Property  situated  and 
taxed  in  another  state  is  exempt.) 

New  Hampshire,  P.  S.,  Ch.  55,  §  7.  (Shares  in 
non-resident  corporations  are  not 
taxed  where  either  the  stock  or 
property  represented  by  it  is  taxed 
in  another  state.) 

97  The  general  provision  for  the  taxation  of  all  personal  property 
would  seem  to  authorize  a  tax  on  shares  of  stock,  but  in  practice,  ap- 
parently, no  such  tax  is  levied. 

98  "We  think  the  Legislature  intended  to  have  shares  of  stock  in 
foreign  corporations  held  by  owners  resident  here,  taxed  only  in  the 
exceptional  cases  where  they  are  not  in  fact  taxed  elsewhere  .  .  .  and 
the  fair  presumption  in  any  given  case  is  that  such  shares  are  in  fact 
taxed  elsewhere,"    Lockwood  v.  Weston,  61  Conn.  211,  218. 


260  Digest  of  Corporation  Laws. 

New  Jersey**  G.  L.,  Taxes,  §  200.  (Stocks  out  of 
the  state  on  which  taxes  have  been 
paid  during  the  preceding  year 
are  exempt.) 

New  York™  G.  L.,  Ch.  24,  §  37.  (Stocks  other- 
wise taxable  are  exempt.) 

Rhode  Island,  G.  L.,  Ch.  45,  §  10.  (Shares  in  any 
corporation  without  the  state  which 
is  or  whose  shares  are  liable  to 
taxation  in  the  state  where  it  is 
located  are  exempt.) 

Vermont,101  Stat.,  §  362,  IF  3.  (Shares  of  stock  in  a 
corporation  in  another  state,  when 
the  corporation  is  taxed  there  for 
all  its  stock,  or  when  all  the  stock 
is  taxed  in  such  state  to  the  holders 
whether  residents  or  non-residents 
of  such  state,  are  exempt.) 

TITLE   C.     RETALIATORY     TAXATION    OP    FOREIGN 
CORPORATIONS. 

"  When,  by  the  laws  of  any  other  state,  any  greater  taxes 
are  imposed  upon  corporations  of  this  state,  doing  business 
in  such  other  state,  than  the  laws  of  this  state  impose  upon 
their  corporations  doing  business  in  this  state,  the  same 
taxes  shall  be  imposed  upon  all  corporations  of  such  other 

99  By  the  earlier  decisions,  shares  of  stock  in  non-resident  corporations 
are  held  taxable.     State  v.  Danser,  23  N.  J.  L.  552 ;    Newark  City  Bank 
v.  Assessor,  30  N.  J.  L.  13.    But  it  is  held  that  they  are  exempt  under 
the  present  law.    Smith  v.  Ramsey,  54  N.  J.  L.  546 ;   De  Baun  v.  Smith, 
55  N.  J.  L.  110. 

100  Shares  in  non-resident  corporations,  domestic  or  foreign,  are  exempt 
on  the  assumption  that  the  corporations  are  taxed  on  their  property  and 
capital  stock  in  the  state  where  they  are  located.    People  ex  rel.  Trow- 
bridge  v.  Commr.  of  Taxes,  4  Hun  (N.  Y.)  595. 

101  New  Hampshire  and  Vermont  are  consistent  in  following  out  the 
theory  of  the  legal  situs  of  corporate  shares,  which  they  have  recognized 
in  taxing  the  shares  of  non-residents  in  corporations  within  the  state. 
In  Vermont  a  tax  may  apparently  be  levied  on  the  shares  of  stock  in 
non-resident  corporations,   when   the   corporate    stock  is  assessed  in 
another  state  to  resident  holders  only. 


Retaliatory   Taxation.  261 

state  doing  business  within  this  state."  This  provision  from 
the  New  Jersey  law  is  repeated  verbatim  in  the  law  of  Dela- 
ware. These  seem  to  be  the  only  states  which  provide  for 
reciprocal  or  retaliatory  taxation  of  ordinary  business  corpo- 
rations, though  similar  provisions  for  such  taxation  in  the 
case  of  insurance  or  other  special  kinds  of  corporations  may 
be  found  in  other  states. 

Delaware,  L.  1901,  Ch.  15,  §  9. 
New  Jersey,  L.  1896,  Ch.  185,  §  101. 


262  Digest  of  Corporation  Laws. 

CHAPTER    VII. 

LICENSE  TAXES  ON  DOMESTIC  CORPORATIONS. 


All  the  forms  of  taxation  thus  far  considered  fall  under 
the  head  of  the  General  Property  Tax.  That  tax  is  based 
on  the  principle  that  every  member  of  the  community  should 
be  assessed  according  to  his  relative  ability  to  bear  the  com- 
mon burden.  The  value  of  his  property  seems  to  be  the 
best  practical  test  of  his  individual  ability,  and  has  therefore 
been  adopted  as  the  standard  of  taxation.  For  the  purposes 
of  such  taxation,  all  persons  and  all  property,  in  the  eye  of 
the  law,  stand  on  an  equal  footing  and  are  subject  to  assess- 
ment on  a  uniform  basis. 

But  in  the  law  of  taxation  the  principle  is  also  recognized 
that  where  an  individual  receives  from  the  state  any  special 
privilege  not  enjoyed  by  all  citizens  as  of  common  right,  he 
must,  in  return  for  the  same,  make  a  special  contribution  to 
the  state  revenue.  This  latter  principle  is  the  one  which 
governs  the  levy  of  the  license  taxes  considered  in  this 
chapter. 

Under  the  general  head  of  license  taxes  we  have  included 
three  special  forms  of  tax,  the  charter  fee,  the  franchise  tax 
and  the  occupation  tax.  Of  these,  the  first  two  are  peculiar 
to  corporations,  while  the  third  applies  to  corporations  and 
individuals  alike. 

The  charter  fee  is  levied  in  return  for  the  special  privilege 
granted  by  the  state  in  creating  the  corporation.  The  fran- 
chise tax,  on  the  other  hand,  is  levied,  not  for  the  privilege 
of  becoming  a  corporation,  but  for  the  privilege  of  continuing 
to  be  a  corporation,  that  is  of  doing  business  in  a  corporate 
capacity.  The  third  form  of  tax,  the  occupation  tax,  is 
levied  on  corporations,  firms  and  individuals  for  the  privilege 
of  exercising  certain  occupations  or  carrying  on  certain  kinds 
of  business.  All  these  forms  of  taxation  possess  the  charac- 
teristic of  being  license  or  privilege  taxes. 


License  Taxes.  263 

The  prevailing  usage  of  the  states  has  been  followed  in 
calling  the  first  a  fee,  and  the  second  and  third  a  tax.  But 
whether  they  are  properly  fees  or  taxes,  they  may  be  classi- 
fied together  as  license  taxes,  in  the  wider  sense  in  which 
the  term  tax  is  used  for  any  compulsory  contribution  for  the 
support  of  the  government.  Strictly,  a  payment  to  the 
government  for  a  special  privilege  is  a  fee  rather  than  a  tax. 
A  tax,  in  the  exact  use  of  the  term,  is  levied  as  part  of  a 
common  burden,  and  the  individual  receives  no  special  ser- 
vice, or  at  least  no  equivalent  special  service,  from  the  govern- 
ment in  return  for  the  sum  paid.  In  the  case  of  a  fee,  on  the 
other  hand,  the  special  payment  by  the  individual  or  by  a 
certain  class  of  individuals  is  regarded  as  an  equivalent  for 
"the  necessary  or  probable  expense  of  issuing  the  license, 
and  of  inspecting  and  regulating  the  business."  102  Where 
the  individual  is  required  to  make  a  special  contribution  to 
the  public  revenue,  in  excess  of  the  normal  cost  of  the  partic- 
ular service  which  he  receives,  such  contribution  partakes  of 
the  nature  of  a  tax  and  also  of  a  fee,  but  in  legal  definition  it 
is  a  tax. 

In  all  the  corporate  license  taxes  the  element  of  privilege  is 
present.  The  question,  therefore,  whether  they  are  properly 
taxes  or  fees  depends  on  whether  the  privilege  received 
is  commensurate  with  the  tax  paid.  As  the  rate  of  each  of 
these  taxes  varies  so  greatly  in  the  different  states,  it  is 
impossible  for  any  quantitative  test  to  yield  a  uniform  result 
throughout  the  states.  So,  whether  tax  or  fee  is  used  as  the 
general  term,  it  is  bound  to  be  inaccurate  in  its  application 
to  specific  states.  As  technical  accuracy  is  therefore  impos- 
sible, it  seems  better  to  follow  the  customary  usage  in  apply- 
ing the  term  fee  to  the  tax  on  corporate  charters,  and  the  term 
tax  to  the  tax  on  the  corporate  franchise,  and  the  tax  on  the 
corporate  business. 

The  importance  of  discriminating  between  a  tax  and  a  fee 
lies  mainly  in  the  fact  that  the  courts  have  held  that  a  fee  is 
within  the  police  power  while  a  tax  is  not.103  For  our  present 
purposes,  however,  the  distinction  is  not  important  except  in 

102  Cooley's  Law  of  Taxation,  2d  ed.,  p.  598,  and  cases  cited. 

103  Mankato  v.  Fowler,  32  Minn.  364  ;  Taylor  v.  Tine  Bluff,  34  Ark.  603. 


264  Digest  of  Corporation  Laws. 

so  far  as  it  emphasizes  the  distinction  between  a  property  tax 
and  the  license  taxes  we  are  now  considering.  But  the  latter, 
though  having  so  little  in  common  with  the  general  property 
tax,  are  equally  a  part  of  taxation  in  the  larger  sense.104 

TITLE  A.     THE   CHARTER  FEE. 

The  charter  fee  is  in  the  nature  of  a  license  charged  for 
the  privilege  of  incorporation  and  is  a  condition  precedent 
to  the  grant  of  the  charter  by  the  state. 

In  most  of  the  states  no  special  name  is  given  to  this  fee, 
but  it  is  described  merely  as  a  fee  which  must  be  paid  to  the 
Secretary  of  State  for  filing  the  articles  and  certifying  the 
incorporation,  or  as  a  fee  which  must  be  paid  at  the  time  of 
filing  the  articles,  or  as  a  fee  which  must  be  paid  before  the 
charter  will  be  granted. 

Where  the  fee  is  specifically  named  we  find  the  usual 
diversity  of  practice  in  the  states.  For  example,  in  Mary- 
land it  is  termed  a  bonus  on  the  capital  stock,  in  Pennsyl- 
vania a  bonus  on  charters,  in  Tennessee  a  privilege  tax,  in 
Kentucky  and  New  York  an  organization  tax,  in  Florida, 
Kansas  and  New  Hampshire  a  charter  fee. 

If  the  tax  applied  to  domestic  corporations  only,  the  term 
organization  tax  would  seem  the  most  descriptive,  but  as 
foreign  corporations  are  also  subject  to  this  tax,  charter  fee, 
as  the  broader  term,  is  perhaps  to  be  preferred. 

It  is  to  be  noted  that  this  form  of  tax  differs  in  one  im- 
portant particular  from  all  other  forms  of  corporate  taxation . 
It  is  not  an  annual  or  recurring  tax,  but  is  payable  only 
when  the  corporation  is  created,  or  when  its  existence  is  en- 
larged by  a  subsequent  increase  of  the  capital  stock. 

In  the  citations  which  follow,  no  attempt  has  been  made 
to  include  all  the  minor  clerical  or  recording  fees  of  the  Sec- 
retary of  State,  the  Register  of  Deeds  or  other  state  officers. 
Such  charges  are  usually  fixed  at  so  much  a  page,  and  vary 
with  the  length  of  the  document  to  be  transcribed.  If,  how- 
ever, any  such  fee  is  more  than  nominal,  the  amount  has 
been  stated. 

J04  por  a  fuiier  discussion  of  this  general  subject,  seeCooley's  Law  of 
Taxation,  pp.  586-605  ;  Seligman's  Essays  in  Taxation,  pp.  274-282. 


The  Charter  Fee.  265 


ART.  1.    THE  FEE  IS  A  FIXED  SUM  INDEPENDENT  OF  THE  AMOUNT 
OF  THE  CAPITAL  STOCK. 

Sec.  a.    A  nominal  clerical  fee  only. 

District  of  Columbia,  Code,  §§  552,  605.      (15  cents 

for  each  100  words.) 


Sec.  b.    A  fee  of  $2. 50  for  filing  the  articles  of  incorporation. 
Oregon,  Ann.  L.,  §  2337. 

Sec.  c.    A  fee  of  $5. 

Arizona,  R.  S.,  §  2592.  (Also  $3  each  for  affidavit 
of  publication,  certificate  of  incorpo- 
ration, and  certificate  of  increase  or 
decrease.) 

Georgia,  Practice  Code,  §  5397.  (For  recording  the 
articles  of  incorporation.) 

Louisiana,  L.  1902,  No.  163.  (For  examination  of 
charter  by  District  Attorney.) 

Nevada,  Comp.  L.,  §  1938.  (For  filing  the  articles 
of  incorporation. ) 

Oklahoma,  Stat.,  §  2900.  (For  filing  the  articles 
of  incorporation.  Also  $3  for  certifi- 
cate.) 

West  Virginia,  Code,  Ch.  54,  §  18.  (For  issuing 
and  filing  certificate  of  incorporation 
and  for  certified  copy.  A  proportionate 
part  of  the  annual  franchise  tax  up  to 
May  first  following  must  also  be  paid 
at  the  time  of  incorporation.  See  page 
278,  below.) 

Sec.  d.    A  fee  of  $10  for  filing  the  articles  of  incorporation. 

South  Dakota,  Stat.,  §  1911. 

Washington,  Code,  §  4285.  (Also  $5  for  certificate 
of  incorporation. ) 

Wisconsin,  Stat.,  §  1772.  (Beet  sugar  manufactur- 
ing corporations.) 


266  Digest  of  Corporation  Laws. 


Sec.  e.     A  fee  of  $25  for  filing  the  articles  and  $10  for  any 

amendment. 

Arkansas,  Stat.,  §  3299. 
Indian  Territory,  Stat.,  §  2212. 

Sec.  f.    A  fee  of  $50  if  incorporated  by  special  act. 

New  Hampshire,  P.  S.,  Ch.  14,  §  5.  (Corporations 
doing  business  and  having  their  prin- 
cipal office  in  the  state.) 

ART.    2.    THE    CHARTER    FEE   IS    A    FIXED    PERCENTAGE    OF  THE 
AMOUNT  OF  THE   AUTHORIZED   CAPITAL  STOCK. 

Sec.  a.    ^  of  1%  (10  cents  on  each  $1,000).    Same  fee  for 

increase. 

Nebraska,  Comp.  Stat.,  §  4991.  (Same  fee  for  con- 
solidation. Minimum  fee  $10.  For 
filing  certificate  $2.) 

Sec.  b.    ^  of  1%  (15  cents  on  each  $1,COO).    Same  fee  for 

increase. 

Delaware,  L.  1901,  Ch.  167,  §  129.  (Also  $3  to 
secretary  of  state.  Same  fee  for  con- 
solidation on  amount  in  excess  of  com- 
bined original  stocks.  For  certificate 
increase  or  decrease  of  number  of 
shares,  change  of  business  or  renewal, 
each  $20.  All  other  certificates  $5.) 

Sec.  c.    -|-  of  1%  (20  cents  on  each  $1,000).     Same  fee  for 

increase. 

New  Jersey,  L.  1896,  Ch.  185,  §  114.  >  (Minimum 
North  Carolina,  L.  1901,  Ch.  2,  §  96.  5  fee  $25. 
Minimum  fee  for  increase  $20.  Same 
rate  for  consolidation  on  amount  in  ex- 
cess of  the  combined  original  capital 
stocks.  For  renewal,  change  of  name 
or  nature  of  business,  or  decrease  of 
capital  stock,  each  $20.) 


The  Charter  Fee.  267 


Sec.  d.    -^  of  1%  (25  cents  on  each  $1,000).    Same  fee  for 

increase. 

Utah,  R.  S.,  §  965;  L.  1901,  p.  58.  (Maximum 
fee  $2,500.  For  certificate  of  incor- 
poration or  amendment,  each  $5.) 

Sec.  e.    ~  of  1%.    Same  fee  for  increase. 

Massachusetts,  R.  L.,  Ch.  110,  §  86.  (Minimum 
fee  $5.  Maximum  fee  $200.) 

Michigan,  Comp.  L.,  §  8574.  (Same  fee  for  con- 
solidation and  renewal.  Minimum  fee 
$5.) 

New  York,  G.  L.,  Ch.  24,  §  180;  L.  1897,  Ch. 
369;  L.  1901,  Ch.  448.  (Minimum 
fee  $1.  Also  $10  for  filing  articles  of 
incorporation.  L.  1892,  Ch.  683,  § 
26.) 

Sec.  f.    j*  of  1%.    Same  fee  for  increase. 

Indiana,  Ann.   Stat.,  §  7631.  ^         (Minimum      fee 

Ohio,  Ann.  Stat.,  §  148«,  5  $10.  Same  rate  for 
consolidation  with  no  reduction  for 
fees  previously  paid.  Filing  certifi- 
cate of  reduction  of  stock  or  amend- 
ment of  articles,  each  $5.) 

Kentucky,  Stat,,  §  4226;  L.  1902,  p.  367. 

Rhode  Island,  G.  L.,  Ch.  29,  §  16. 

Tennessee,  L.  1899,  Ch.  2,  209,  432,  §  9.  (For 
issuing  charter  $10.  For  amendment 
of  articles  $10,  or  if  created  by  special 
act  $100.) 

Wisconsin,  Stat.,  §  1772.  (Except  beet-sugar  manu- 
facturing corporations.  Minimum  fee 
$25.  Maximum  fee  in  case  of  mining 
corporations  $150.) 


268  Digest  of  Corporation  Laws. 


Sec.  g.    I  of  1%.    Same  fee  for  increase. 

Maryland,  L.  1894,  Ch.  114;  L.  1900,  Ch.  272. 
(The  charter  of  any  corporation  failing 
to  begin  business  within  two  years  shall 
lapse,  unless  a  similar  fee  is  paid  yearly 
thereafter  until  the  corporation  begins 
business.) 

Sec.  h.    |ofl%.    ($2  on  each  $1,000.)    Same  fee  for  increase. 

Florida,  R.  S.,  §  2127  ;  L.  1893,  Ch.  4169.  (Mini- 
mum fee  $5.  Maximum  fee  $250.) 

Sec.  i.    I  of  1%.    Same  fee  for  increase. 

Pennsylvania,  G.  L.,  Corporations,  §  6,  Taxation, 
§  25;  L.  1899,  p.  189,  §  1.  (Iron, 
coal,  oil,  manufacturing,  mining  or 
warehousing  corporations  created  by 
special  act  must  pay  an  additional  fee 
of  $200.  Other  corporations  created 
by  special  act,  an  additional  fee  of  $20. 
Also  fee  of  $5  to  the  Secretary  of  State 
for  each  paper  to  be  filed  or  recorded.) 

ART.  3.     THE    CHARTER    FEE    IS    GRADED    ACCORDING    TO    THE 
AMOUNT  OF  THE   AUTHORIZED  CAPITAL  STOCK. 

In  the  following  states  the  charter  fee  increases  with  the 
amount  of  the  capital  stock  but  in  a  diminishing  ratio.  The 
larger  corporations  are  favored  by  a  smaller  proportionate 
fee. 

Wherever  the  fee,  in  the  following  citations,  is  stated  to 
be  a  certain  sum  for  each  one  thousand  dollars  or  other 
specific  amount  of  capital  stock,  it  is^to  be  understood  that 
the  same  fee  must  be  paid  for  any  fractional  part  of  such 
amount. 


The  Charter  Fee.  269 
Alabama,  Civ.  Code,  §  1287. 

For  capital  stock  up  to  $50,000,         ..         .  $25  00 

Over  $50,000  but  not  over  $100,000,          .  50  00 

Over  $100,000  but  not  over  $250,000,         .  75  00 

Over  $250,000  but  not  over  $500,000,         .  100  00 

Over  $500,000  but  not  over  $1,000,000,      .  200  00 

Over  $1,000,000, 25000 

And  same  proportionate  fees  for  increase. 

California,  L.  1901,  Ch.  70. 

For  capital  stock  up  to  $25,000,          .         .  $15  00 

Over  $25,000  but  not  over  $75,000,   .         .  25  00 

Over  $75,000  but  not  over  $200,000, .  50  00 

Over  $200,000  but  not  over  $500,000,         .  75  00 

Over  $500,000  but  not  over  $1,000,000,     .  100  00 

Over  $1,000,000, 150  00 

For  increase  or  decrease,  on  each  $10,000,  5  00 

For  issuing  certificate  of  incorporation,       .  3  00 

For  amendment  of  charter,         .         .         .  5  00 

Colorado,  Ann.  Stat.,  §  628;  L.  1899,  p.  164,  §  2; 
L.  1901,  Ch.  52,  §  §  1-3,  9,  10.  (For  in- 
corporation, consolidation  or  renewal.) 

For  capital  stock  up  to  $50,000,         .         .  $20  00 

For  each  additional  $1,000,        ...  20 

For  increase,  on  each  $1,000,     ...  20 
For  certificate    of  full    paid   stock  up  to 

$50,000, 2  50 

For  each  additional  $1 ,000  of  full  paid  stock,  05 

For  change  of  corporate  name,  .         .  25  00 

For  amendment  of  charter,         .         .         .  5  00 

For  certificate  of  full  payment  of  fees,        .  5  00 

Connecticut,  G.  S.,  §  3356. 

On  each  $1,000  up  to  $5,000,000,      .  $0  50 

On  each  $1,000  over  $5,000,000,        .         .  10 

Minimum  fee,    .         .         .         .         .         .  25  00 

And  same  fees  for  increase. 


270  Digest  of  Corporation  Laws. 

Idaho,  Pol.  Code,  §  102. 

For  capital  stock  up  to  $25,000,         .  $5  00 

Over  $25,000  but  not  over  $100,000,           .  10  00 

Over  $100,000  but  not  over  $500,000,        .  20  00 

Over  $500,000 25  00 

For  certificate  of  incorporation,          .         .  3  00 

Illinois,  R.  S.,  Ch.  53,  §  10  a. 

For  capital  stock  up  to  $2,500,  .  .  .  $30  00 

Over  $2,500  but  not  over  $5,000,  .  .  50  00 

For  each  additional  $1,000,  .  .  .  100 
And  same  fees  for  increase. 

Iowa,  Code,  §  1610 ;  L.  1898,  Chs.  40,  41 ;  L.  1900, 
Ch.  56;  L.  1902,  Ch.  66.  (Except  beet- 
sugar  manufacturing  corporations.) 

For  capital  stock  up  to  $10,000,  .  .  $25  00 

For  each  additional  $1,000,        .  .  .  1  00 

For  increase  on  each  $1,000,  .  .  .  100 
Same  fees  for  renewal. 

Kansas,  G.  S.,  §§  1261,  1264. 

For  capital  stock  up  to  $100,000,  .  -j*0  of  1% 
For  additional  amount  up  to  $500,000,  ^  of  1  % 
For  each  $1,000,000  or  major  part  thereof 

over  $500,000, $200  00 

Same  fees  for  increase  or  renewal. 

Also  an  application  fee  of          .         .  25  00 

Maine,  R.  S.,  Ch.  48,  §  18  ;  L.  1897,  Ch.  225;  L. 
1901,  Ch.  229,  §  18. 

(1)  Corporations  created  by  special  act : 

For  capital  stock  up  to  $5,000, .         .  .     $15  00 

Over  $5,000  but  not  over  $10,000,      .  .       25  00 

Over  $10,000  but  not  over  $50,000,   .  75  00 

Over  $50,000  but  not  over  $100,000,  .     125  00 

For  each  additional  $100,000,    .         .  60  00 


The  Charter  Fee.  271 

(2)  Corporations  organized  under  the   general 

law: 

For  capital  stock  up  to  $10,000,         .         .  $1000 

Over  $10,000  but  not  over  $500,000, .  50  00 

For  each  additional  $100,000,    .         .  10  00 

For  .increase  to  amount  not  over  $500,000,  40  00 
For    increase     over     $500,000,    on    each 

$100,000,  .                                             .  10  00 

To  Attorney-General,        .         .         .         .  5  00 

To  Secretary  of  State,        .         .         .         .  5  00 

To  Register  of  Deeds,        .         .         .         .  5  00 

Minnesota,   Stat.,    §§    3391-3;    L.    1901,   Ch.    206. 
(Except  manufacturing  corporations.) 

For  capital  stock  up  to  $50,000,         .         .  $50  00 

For  each  additional  $10,000,      .         .         .  5  00 

For  increase  on  each  $10,000,    .         .         .  500 
And  same  fees  for  renewal. 

Mississippi,  L.  1900,  Ch.  45. 

For  capital  stock  up  to  $10,000,         .         .  $20  00 

Over  $10,000  but  not  over  $30,000,  .  40  00 

Over  $30,000  but  not  over  $50,000,    .  60  00 
Over  $50,000,   .                                              ^of  1% 

Maximum  fee, $250  00 

Fee  for  consolidation,        .         .         .  25  00 

Fee  for  other  inter-corporate  agreements,  .  20  00 

For  amendment  of  charter,         .         .         .  5  00 

Missouri,  R.  S,,  §  956. 

For  capital  stock  up  to  $50,000,         .         .  $50  00 

For  each  additional  $10,000,      .         .         .  5  00 

For  increase  on  each  $10,000,    .         .         .  5  00 

Also  to  Secretary  of  State,         .         .         .  2  50 

Montana,  L.  1899,  p.  44. 

For  each  $1,000  up  to  $1,000,000,     .  $0  50 

For  each  additional  $1,000,        ...  25 

Minimum  fee  for  incorporation  or  increase,  20  00 

Maximum  fee, 1,000  00 

For  amendment  of  charter  and  filing  and 

issuing  certificate  of  decrease,  each,    .  5  00 


272  Digest  of  Corporation  Laws. 

For  continuance  of  corporate  existence  : 
For  each  $1,000  up  to  $1,000,000,     .  $0  25 

For  each  additional  $1000,         ...  10 

New  Hampshire,  P.  S.,  Ch.  14,  §  6. 

Corporations  which  are  not  to  carry  on 
their  business  or  have  their  principal 
office  in  the  state  : 

For  capital  stock  up  to  $25,000,  .  .  $10  00 
Over  $25,000  but  not  over  $100,000,  .  25  00 
Over  $100,000  but  not  over  $500,000,  .  50  00 
Over  $500,000  but  not  over  $1,000,000,  .  100  00 
Over  $1,000,000, 200  00 

New  Mexico,  L.  1899,  p.  171,  §  1. 

(1)  Corporations  for  mining,  milling  or  smelt- 

ing: 

For  capital  stock  up  to  $100,000,  .  .  $25  00 
For  each  additional  $100,000,  .  .  .  5  00 

(2)  Corporations   for  cultivation,  manufacture 

or  sale  of  sugar-beets  : 

For  capital  stock  up  to  $50,000,  .  .  $15  00 
For  each  additional  $10,000,  .  .  .  1  00 

(3)  Corporations  for  manufacturing  or  indus- 

trial purposes : 

For  capital  stock  up  to  $10,000,         .  .  $10  00 

For  each  additional  $5,000,        .         .  .  2  00 

For  increase  or  decrease,  on  each  $1,000,  .  25 

North  Dakota,  Code,  §§  95,  2865,  2866. 

For  capital  stock  up  to  $50,000,          .  .  $50  00 

For  each  additional  $10,000,      .         .  .  5  00 

For  increase  on  each  $10,000,    .         .  .  5  00 

For  filing  charter,      ....  5  00 

For  issuing  certificate  of  incorporation,  .  5  00 

For  filing  amendment  of  charter,        .  .  3  00 

For  certificate  of  increase  or  decrease,  .  3  00 

South  Carolina,  Civil  Code,  §  1888. 

For  capital  stock  up  to  $100,000,       .  -^  of  1% 

For  amount  from  $100,000  to  $1,000,000,  -fa  of  1% 

For  amount  over  $1,000,000,     .         .  &otl% 


The  Charter  Fee.  273 

Texas,  R.  S.,  §  2439. 

For  capital  stock  up  to  $10,000,         .         .  $25  00 

For  each  additional  $10,000,      .         .         .  5  00 

Vermont,  L.  1898,  p.  14. 

For  capital  stock  up  to  $5,000,  .         .         .  $10  00 

Over  $5,000  but  not  over  $10,000,     .         .  25  00 

Over  $10,000  but  not  over  $50,000,    .  50  00 

Over  $50,000  but  not  over  $200,000,           .  100  00 

Over  $200,000  but  not  over  $500,000,         .  200  00 

Over  $500,000  but  not  over  $1,000,000,     .  300  00 

Over  $1,000,000, 50000 

For  corporations   created   by  special   act, 

minimum  fee, 25  00 

And  same  fees  for  increase. 

Virginia,  L.  1902,  Ch.  509. 

(1)  Corporations  created  by  special  act': 

For  capital  stock  up  to  $5,000,  .         .         .  $25  00 

Over  $5,000  but  not  over  $10,000,     .  50  00 

Over  $10,000  but  not  over  825,000,    .  75  00 

Over  $25,000  but  not  over  $50,000,   .         .  125  00 

Over  $50,000  but  not  over  $100,000,          .  200  00 

Over  $100,000  but  not  over  $300,000,        .  325  00 

Over  $300,000  but  not  over  $500,000,         .  450  00 

Over  $500,000  but  not  over  $800,000,         .  575  00 

Over  $800,000  but  not  over  $1,000,000,  .  750  00 
Over  $1 ,000,000  but  not  over  $10,000,000,  1 ,000  00 
For  each  additional  $10,000,000  up  to 

$90,000,000, 250  00 

Over  $90,000,000,     ....  5,000  00 

Same  fees  for  renewal  or  increase. 

(2)  Corporations  organized  under  the  general  law  : 

For  capital  stock  up  to  $5,000,  .         .         .  $15  00 

Over  $5,000  but  not  over  $10,000,     .  30  00 

Over  $10,000  but  not  over  $25,000,  .  .  45  00 
Over  $25,000  but  not  over  $50,000,  .  .7500 

Over  $50,000  but  not  over  $100,000,          .  125  00 

Over  $100,000  but  not  over  $300,000,         .  195  00 

Over  $300,000  but  not  over  $500,000,         .  270  00 

Over  $500,000  but  not  over  $800,000,         .  345  00 

Over  $800,000  but  not  over  $1,000,000,     .  450  00 

Over  $1,000,000, 60000 


274  Digest  of  Corporation  Laws. 

Wyoming,  E.  S.,  §  3030. 

For  capital  stock  up  to  $5,000,  .         .  $5  00 

Over  $5,000  but  not  over  $100,000,   .  10  00 

For  each  additional  $1,000,        ...  05 

TITLE  B.    THE  ANNUAL  FRANCHISE  TAX. 

The  charter  fee,  as  we  have  seen,  is  a  license  paid  for 
the  privilege  of  incorporation.  The  right  of  exercising  the 
powers  thereby  conferred,  that  is,  of  doing  business  in  a 
corporate  capacity,  is  in  several  states  regarded  as  a  separate 
privilege,  and  is  separately  assessed  by  a  tax  on  the  corporate 
franchise,  commonly  known  as  a  franchise  tax. 

The  term  corporate  franchise  is  used  in  many  states  in  a 
restricted  sense,  to  describe  the  special  franchise  for  the  use 
of  public  ways,  or  for  the  exercise  of  eminent  domain,  en- 
joyed by  railroads,  telegraph  and  telephone  companies,  and 
other  public-service  corporations.  As  no  such  franchise  is 
ordinarily  possessed  by  business  corporations,  this  special  use 
of  the  term  may,  for  our  present  purpose,  be  disregarded. 
Only  the  general  corporate  franchise,  incident  to  all  corpora- 
tions by  virtue  of  their  corporate  status,  is  here  considered. 

The  franchise  of  a  corporation,  in  this  general  sense,  is 
the  privilege  granted  by  the  state  to  certain  individuals  of 
acting  with  legal  individuality  and  divisible  share  capital. 
The  attributes  of  limited  liability  and  immortality  are  also 
conferred  in  a  majority  of  the  states. 

It  has  already  been  pointed  out  that  the  franchise  tax,  as 
a  license  or  privilege  tax,  is  essentially  different  in  principle 
from  the  property  tax.  As  this  franchise  is  something  sep- 
arate and  apart  from  the  property  of  the  corporation,  it  may 
be  separately  taxed. 

But  while  the  corporate  privileges  may  be  dissociated 
from  the  ordinary  property  values,  and  taxed  under  the 
franchise  tax,  it  would  seem  that  if  these  privileges  are 
capable  of  being  measured,  they  may  also  be  taxed  by  assess- 
ing their  value  under  the  general  property  tax.  Such  an 
alternative  method  is  possible  in  the  case  of  corporations  by 
a  tax  on  the  capital  stock.  As  the  capital  stock  represents 
not  only  the  ordinary  property  of  the  corporation,  but  also 


The  Annual  Franchise  Tax.  275 

all  its  intangible  values,  it  includes  the  value  of  the  corpo- 
rate franchise. 

For  this  reason,  as  we  have  already  seen,  the  tax  on  the 
excess  value  of  the  capital  stock  over  the  property  sepa- 
rately taxed  is  sometimes,  in  the  state  law,  termed  a  fran- 
chise tax.105  But  as  the  franchise  tax,  in  the  proper  sense, 
is  levied  on  a  different  principle,  and  is  governed  by  differ- 
ent legal  rules,  the  two  should  not  be  confounded. 

The  importance  of  discriminating  between  the  property 
tax  and  the  franchise  tax  lies  in  the  fact  that,  while  the 
property  tax  is  hedged  about  with  various  restrictions, 
the  taxation  of  the  corporate  franchise  has  practically  no 
limitation  except  the  discretion  of  the  taxing  power.  This 
legal  distinction  between  the  two  forms  of  tax  has  been  con- 
cisely stated  by  Prof.  Seligman.  "  In  the  first  place,  accord- 
ing to  the  constitutions  of  several  of  the  states,  the  taxes  on 
property  must  be  uniform.  If,  however,  the  corporation 
tax  is  held  to  be  a  franchise  tax,  there  is  no  necessity  of 
such  uniformity  between  the  tax  on  individuals  and  that  on 
corporations.  Secondly,  according  to  the  principles  of  the 
property  tax,  deductions  are  allowed  for  certain  classes  of 
exempt  or  extra-territorial  property.  If  the  tax  is  a  fran- 
chise tax  such  exemptions  cannot  be  claimed.  Thirdly,  if 
the  tax  is  a  franchise  tax  and  not  a  tax  on  property  or 
earnings,  it  may  be  upheld  as  not  interfering  with  inter- 
state commerce.  Finally,  if  the  tax  is  a  franchise  tax,  many 
of  the  objections  to  double  taxation  would  be  removed. 
Every  commonwealth,  for  instance,  could  assess  the  entire 
capital  of  a  corporation,  although  only  a  very  small  portion 
might  be  located  or  employed  within  the  state."106 

We  can  therefore  readily  understand  the  desire  shown  by 
many  of  the  states  to  call  any  special  corporation  tax  a 
franchise  tax. 

But  if  the  franchise  is  reached  for  the  purposes  of  taxation 
by  an  assessment  of  the  actual  value  of  the  capital  stock  at 
the  uniform  property  rate,  the  tax  is  in  principle  a  property 
tax  and  should  be  so  termed. 

We  have,  accordingly,  reserved  the  term  franchise  tax  to 

105  See  p.  223,  supra. 

108  Essays  in  Taxation^  pp.  186-7. 


276  Digest  of  Corporation  L*aws. 

describe  a  form  of  taxation  which,  in  its  practical  operation, 
differs  from  the  property  tax ;  in  other  words,  for  a  tax  on 
corporations  by  an  arbitrary  method  or  at  an  arbitrary  rate. 


ART.  1.    THE  TAX  IS  A  FIXED  SUM  INDEPENDENT  OF  THE  AMOUNT 
OF  THE  CAPITAL  STOCK. 

Washington,  Code,  §  4289.      (Ten  dollars,  $10.) 


ART.  2.    THE  TAX  IS  A  FIXED  PERCENTAGE   OF  THE  PAR  VALUE 
OF  THE  CAPITAL  STOCK. 

Sec.  a.    ^  of  1%  (2  cents  on  each  $1,000)  of  the  total  author- 
ized capital  stock. 

Colorado,  L.  1902,  Ch.  3,  §  64.  (Provided  capital 
stock  is  over  $25,000.  Maximum  fee, 
$1,000.) 

Sec.  b.    ^  of  1%  of  the  subscribed  or  issued  and  outstand- 
ing capital  stock. 

Ohio,  L.  1902,  p.  124,  §  1. 

Sec.  c.    ^  of  1%  of  the  total  authorized  capital  stock,  and 
4%  on  net  profits. 

Massachusetts,  K.  L.,  Ch.  14,  §  §  49,  51.  (%0  of  1  % 
semi-anmially.  Tax  applies  only  to  cor- 
porations organized  for  the  purpose  of 
engaging  without  the  state  in  the  business 
of  mining,  quarrying,  extracting  oils  from 
the  earth,  or  purchasing  or  selling  mines 
or  lands  without  the  state.) 


ART.    3.    THE    TAX   IS    GRADED   ACCORDING  TO    THE    AMOUNT    OF 
THE   CAPITAL  STOCK. 

Alabama,101  L.  1901,  p.  2616.      (Tax  on  the  paid  up 
capital  stock.) 

On  capital  stock  up  to  $10,000,  .  .  $10  00 
Over  $10,000  but  not  over  $25,000,  .  .  15  00 
Over  $25,000  but  not  over  $50,000,  .  .  25  00 

107  A  county  tax,  not  exceeding  50%  of  the  above,  may  also  be  levied. 


The  Annual  Franchise  Tax.  277 

Over  $50,000  but  not  over  $100,000,           .  $50  00 

Over  $100,000  but  not  over  $200,000,         .  75  00 

Over  $200,000  but  not  over  $300,000,         .  125  00 

Over  $300,000  but  not  over  $400,000,         .  170  00 

Over  $400,000  but  not  over  $500,000,         .  200  00 

Over  $500,000  but  not  over  $1,000,000,      .  300  JX) 

Over  $1,000,000,       .         .         .         .         ,  500  00 

Delaware™  L.  1901,  Ch.  15,  §  4. 

On  paid  in  capital  stock  up  to  $3,000,000,  ^  of  1% 
On    capital  stock  issued  and   outstanding 

over  $3,000,000  but  not  over  $5,000,000,  ^  of  1  % 

On  each  additional  $1,000,000,           .         .  $30  00 

Maine,  L.   1901,  Ch.  229,   §   3.      (Tax  on  the  au- 
thorized capital  stock.) 

On  capital  stock  up  to  $50,000,          .  $5  00 

Over  $50,000  but  not  over  $200,000,          .  10  00 

Over  $200,000  but  not  over  $500,000,        .  25  00 

Over  $500,000  but  not  over  $1,000,000,     .  50  00 

On  each  additional  $1,000,000,          .  25  00 


New  Jersey, m  L.   1901,  Ch.  9.     (Tax  on  the  issued 
and  outstanding  capital  stock.) 

On  capital  stock  up  to  $3,000,000,  .  -^  of  1  % 
Over  $3,000,000  but  not  over  $5,000,000,  -fa  of  1% 
For  each  additional  $1,000,000,  .  .  $5000 

"•  Manufacturing  or  mining  corporations  having  at  least  50%  of  their 
capital  invested  in  business  within  the  state  are  exempt.  Such  corpora- 
tions having  less  than  50%  of  their  stock  so  invested  may  deduct  from 
the  amount  of  their  capital  stock  the  assessed  value  of  their  real  and 
personal  estate  used  in  connection  with  their  business.  Mercantile  cor- 
porations which  are  subject  to  a  license  tax  on  their  mercantile  business 
are  also  exempt. 

109  Manufacturing  and  mining  corporations  are  exempt  in  the  same 
manner  as  in  Delaware.  See  note  108. 


278  Digest  of  Corporation  Laws. 

North  Carolina,  L.  1901,  Ch.  9,  §  91.      (Tax  on  the 
paid  in  or  subscribed  capital  stock.) 

On  capital  stock  up  to  $25,000,          .  $5  00 

Over  $25,000  but  not  over  $50,000,   .  10  00 

Over  $50,000  but  not  over  $100,000,  .  25  00 

Over  $100,000  but  not  over  $250,000,  .  50  00 

Over  $250,000  but  not  over  $500,000,  .  100  00 

Over  $500,000  but  not  over  $1,000,000,  .  200  00 

Over  $1,000,000, 500  00 

Texas,  L.   1897,  Ch.   120.      (Tax  on  the  authorized 
capital  stock.) 

On  capital  stock  up  to  $50,000,          .         .  $10  00 

Over  $50,000  but  not  over  $100,000,          .  20  00 

Over  $100,000  but  not  over  $200,000,        .  30  00 

Over  $200,000, 50  00 

Vermont,  Stat.,  §   575.      (Tax  on  amount  of  capital 
stock  or  deposit.) 

On  capital  stock  up  to  $50,000,  .         .     $10  00 

On  each  additional  $50,000,       .         .         .         5  00 
Maximum  fee,  .         .         .         .         .  50  00 

West  Virginia,  L.  1901,  Ch.  35,  §§  34,  35.     (Tax  on 
the  authorized  capital  stock.) 

(1)  Resident  domestic  corporations  (i.e.,  having  princi- 
pal place  of  business  and  chief  works  in  the 
state). 

On  capital  stock  up  to  $10,000,          .         .  $10  00 

Over  $10,000  but  not  over  $25,000,   .         .  15  00 

Over  $25,000  but  not  over  $50,000,   .  20  00 

Over  $50,000  but  not  over  $100,000,           .  25  00 

On  each  additional  $1,000  up  to  $1,000,000,  05 

On  capital  stock  of  $1 ,000,000,          .  70  00 

On  each  additional  $1,000,000,           .         .  1000 


The  Occupation  Tax.  279 

(2)  Non-resident    domestic    corporations    (i.e.,  having 

principal  place  of  business  or  chief  works  outside 
the  state) . 

On  capital  stock  up  to  $25,000,          .         .  $20  00 

Over  $25,000  but  not  over  $100,000,           .  5000 

On  each  additional  $1,000  up  to  $1,000,000,  .   40 

On  capital  stock  of  $1,000,000,           .         .  41000 

On  each  additional  $1 ,000  up  to  $2,000,000,  30 

On  capital  stock  of  $2,000,000,          .         .  710  00 

On  each  additional  $1 ,000  up  to  $3,000,000,  20 

On  capital  stock  of  $3,000,000,          .         .  910  00 

On  each  additional  $1,000  up  to  $4,000,000,  10 
On  capital  stock  of  $4,000,000,  .  1,010  00 

On  each  additional  $1,000,000,           .  50  00 

ART.  4.  THE  TAX  IS  DETERMINED  BY  THE  DIVIDENDS  ON  THE 
PAR  VALUE  OF  THE  CAPITAL  STOCK,  AND  IS  LEVIED  ON 
THE  AMOUNT  OF  THE  CAPITAL  STOCK  EMPLOYED  IN  THE 
STATE.J  10 

I 

New  York,  G,  L.,  Ch.  24,  §§   182,  183;  L.  1901, 
Ch.  558. 

If  dividends  are  not  over  6  % ,  .  .  -^  of  1  % 
For  each  additional  1%  of  dividends,  -fa  of  1% 
If  no  dividends,  on  the  appraised  capital 

employed  within  the  state,111  .         .          fa  of  1  % 

TITLE  C.    THE   OCCUPATION  TAX. 

In  almost  all  the  states,  to  a  greater  or  lesser  degree, 
license  taxes  are  imposed  on  certain  occupations,  trades, 
pursuits  or  avocations.  Such  taxes  may  be  imposed  either 
under  the  police  power  or  the  taxing  power  of  the  state. 

If  the  primary  motive  of  the  tax  is  the  regulation  or  the 
restriction  of  the  business,  and  if  the  amount  of  the  tax  is 

110  Manufacturing,  laundry  and  resident  mining  corporations  having  at 
least  40%  of  their  capital  invested  in  their  business  in  the  state  are  ex- 
empt, but  manufacturing  corporations  to  the  extent  only  of  their  capital 
employed  in  manufacturing  in  the  state.    Ibid. 

111  The  appraised  value  is  to  be  found  by  taking  the  value  of  the  cor- 
porate assets  after  deducting  liabilities,  and  adding  to  the  sum  then  re- 
maining the  value  of  the  good  will  of  the  business,  including  its  right  to 
conduct  it  under  its  franchise.    People  ex  rel.  Wiebusch  and  H.  Co.  v. 
Roberts,  154  N.  Y.  101. 


280  Digest  of  Corporation  Laws. 

governed  by  the  cost  of  such  regulation,  it  is  within  the 
police  power.112  This  kind  of  tax  is  shown  in  its  most 
familiar  form  in  the  ordinary  licenses  for  the  sale  of  intoxi- 
cating liquors.  The  cost  of  such  licenses  would  seem,  in 
many  cases,  to  be  largely  in  excess  of  the  normal  cost  of 
regulation,  but  owing  to  the  policy  of  upholding  such  pay- 
ments, liquor  licenses  are  held  to  be  within  the  exercise  of 
the  police  power  by  taking  into  account  the  incidental  con- 
sequences that  may  be  likely  to  subject  the  public  to  cost, 
such  as  the  prevention  of  resulting  crime  and  disorder.113 

But  an  occupation  tax  may  also  be  levied  under  the  taxing 
power  of  the  state  upon  all  occupations,  however  innocent, 
where  the  primary  object  is  not  regulation  but  revenue.  It 
is  the  latter  form  only  of  the  occupation  tax  that  we  need 
consider. 

This  form  of  tax  is  most  popular  in  the  Southern  states, 
where  it  is  the  source  of  a  considerable  portion  of  tlte  public 
revenue.  Almost  every  occupation  and  employment  has,  in 
one  jurisdiction  or  another,  been  made  subject  to  taxation. 
Even  doctors  and  lawyers  are  not  exempt.  Unless  restricted 
by  the  state  constitution,  the  "right  of  the  state  to  exact 
from  its  citizens  a  tax  regulated  by  the  avocations  they  pur- 
sue cannot  be  questioned."114 

The  fact  that  the  capital  invested  in  any  particular  busi- 
ness is  taxed  ad  valorem  under  the  property  tax  does  not 
interfere  in  any  way  with  the  right  of  the  state  to  subject 
such  business  to  a  license  tax  also.115  The  occupation  tax, 
however,  cannot  be  made  so  high  as  to  prohibit  any  of  the 
avocations  of  life  which  are  not  injurious  to  public  morals, 
offensive  to  the  senses,  nor  dangerous  to  public  health  and 
safety.116  Otherwise,  the  discretion  of  the  state  in  assessing 
such  taxes  is  subject  only  to  the  limitation  that  no  express 
constitutional  rights  of  the  individual  are  violated. 

112  See  ante,  p.  263.        m  Cooley,  Taxation,  p.  598. 

114  Burroughs,  Taxation,  p.  148.  See  also  Pearce  v.  Augusta,  37  Ga. 
597 ;  Jackson  v.  State,  15  Ohio,  652 ;  State  v.  Stephens,  4  Tex.  137 ; 
State  v.  Bock,  9  Tex.  369. 

"'Lunt's  Case,  6  Greenl.  (Me.)  412;  Lewellen  v.  Loekhart,  21  Gratt. 
(Va  )  570 ;  Drexel  v.  Commonwealth,  46  Pa.  St.  31. 

110  In  re  Quong  Woo,  13  Fed.  Rep.  229. 


The  Tax  on  Business  of  Manufacturing.    281 

The  occupation  tax  is  not  a  special  tax  on  corporations, 
but  they  are  within  its  operation  equally  with  individuals. 
It  would  involve  too  much  detail  to  attempt  to  classify  all 
the  special  occupations  and  kinds  of  business  which  are  sub- 
ject to  this  form  of  tax.  But  the  tax  on  manufacturers  and 
merchants,  which  includes  manufacturing  and  mercantile  cor- 
porations, has  been  deemed  of  sufficient  importance  to  war- 
rant its  insertion  in  a  general  scheme  of  corporate  taxation. 

Unless  otherwise  stated,  this  tax  is  a  state  tax.  But  it  is 
locally  assessed,  and  where  a  corporation  has  stores  or 
manufactories  in  different  towns  or  counties  of  the  state  it 
must  pay  a  similar  tax  in  each.  The  mercantile  tax  in 
California,  Montana  and  Nevada  is  a  monthly  tax,  but  for 
uniformity  it  has  been  computed  on  an  annual  basis. 

ART  1.    MANUFACTURING  CORPORATIONS. 

Delaware,111  L.  1901,  Ch.  17.  (A  tax  graded  accord- 
ing to  the  value  of  the  real  and  per- 
sonal estate  used  in  manufacturing  in 
the  state.) 

Where  such  value  is  not  over  $3,000,000,  •£$  of  I  % 
Over  $3,000,000  but  not  over  $5,000,000,  ^  of  1  % 
For  each  additional  $1,000,000,  .  .  $3000 
And  an  additional  specific  tax  of  .  5  00 

Louisiana,  Constit.,  Art.  229;  L.  1898,  No.  171, 
§  3,  IF  1.  (Corporations  for  the 
manufacture  of  alcoholic  liquors, 
tobacco,  cigars  and  cotton  seed  oil 
only.  The  tax  is  graded  according  to 
the  gross  annual  receipts  of  the  busi- 
ness.) 

117  It  will  be  observed  that  this  tax  is  the  same  as  the  franchise  tax, 
but  is  levied  on  the  personal  property  instead  of  on  the  capital  stock. 
Manufacturing  corporations  employing  at  least  50%  of  their  capital 
stock  in  their  business  in  the  state  pay  this  occupation  tax  in  lieu  of  any 
franchise  tax.  Other  manufacturing  corporations  are  taxed  under 
the  franchise  tax  for  the  excess  value  only  of  their  capital  stock  over 
the  value  of  their  real  estate  and  the  personal  property  taxed  under 
the  occupation  tax.  See  note  108. 


282  Digest  of  Corporation  Laws. 

Where  the  amount  is  not  over  $25,000,  .     $15  00 

Over  $25,000  but  not  over  $30,000,        .  19  50 

Over  $30,000  but  not  over  $40,000,        .  21  00 

Over  $40,000  but  not  over  $50,000,        .  28  00 

Over  $50,000  but  not  over  $75,000,        .  35  00 

Over  $75,000  but  not  over  $90,000,       .  52  50 

Over  $90,000  but  not  over  $95,000,        .  63  00 

Over  $95,000  but  not  over  $100,000,     .  65  50 

Over  $100,000  but  not  over  $150,000,   .  70  00 

Over  $150,000  but  not  over  $200,000,    .  .     105  00 

Over  $200,000  but  not  over  $300,000,   .  .     140  00 

Over  $300,000  but  not  over  $400,000,   .  .     210  00 

Over  $400,000  but  not  over  $500,000,  .  .     280  00 

Over  $500,000  but  not  over  $750,000,  .  .     350  00 

Over  $750,000  but  not  over  $1,000,000,  .     525  00 

Over  $1,000,000  but  not  over  $2,000,000,  .     700  00 

Over  $2,000,000  but  not  over  $3,000,000,  .  1,400  00 

Over  $3,000,000  but  not  over  $4,000,000,  .2,100  00 

Over  $4,000,000  but  not  over  $5,000,000,  .  2,800  00 

Over  $5,000,000  but  not  over  $6,000,000,  .  3,500  00 

Over  $6,000,000  but  not  over  $7,000,000,  .  4,200  00 

Over  $7,000,000  but  not  over  $8,000,000,  .  4,900  00 

Over  $8,000,000  but  not  over  $9,000,000,  .  5,600  00 

Over  $9,000,000  but  not  over  $10,000,000,  .  7,000  00 

$10,000,000  or  over,     .         .                  .  .8,00000 

Mississippi,  L.  1898,  Ch.  5,  §  25.  (Cotton  seed  oil 
mills  pay  a  tax  graded  according  to 
the  amount  of  capital.) 

Over  $30,000  but  not  over  $75,000,  .  .  $175  00 
Over  $75,000  but  not  over  $100,000,  .  200  00 
Over  $100,000, 250  00 

Missouri,  R.  S.,  §§  8486,  8542,  8566.  (Though 
named  a  license  tax,  this  tax  is  levied 
on  the  property  valuation  of  the  ma- 
chinery, raw  materials  and  finished  pro- 
ducts at  the  uniform  property  rate.  See 
note  2.) 

Montana,  Pol.  Code,  §  4082.  (A  specific  tax  of 
$40,  if  the  amount  of  business  is  over 
$15,000  a  year.) 


The  Tax  on  Mercantile  Business.          283 

Tennessee,  Code,  §  712.  (Cotton  seed  oil  mills  pay 
a  tax  graded  according  to  the  number 
of  tons  pressed  annually  by  each  plant.) 

Where  the  amount  is  not  over  1,000  tons, .  $15  00 

Over  1,000  tons  but  not  over  5,000  tons,   .  30  (JO 

Over  5,000  tons  but  not  over  10,000  tons,  40  00 

Over  10,000  tons  but  not  over  20,000  tons,  60  00 

Over  20,000  tons  but  not  over  30,000  tons,  75  00* 

Over  30,000  tons  but  not  over  50,000  tons,  100  00 

Over  50,000  tons  but  not  over  75,000  tons,  200  00 

Over  75,000  tons  but  not  over  100,000  tons,  250  00 

Over  100,000  tons  but  not  over  150,000  tons,  300  00 


ART.  2.    MERCANTILE  CORPORATIONS. 

California,  Pol.  Code,  §  3382.  (A  tax  graded  ac- 
cording to  the  average  amount  of  sales. ) 

Where  the  amount  is  not  over  $15,000,  .  $12  00 

Over  $15,000  but  not  over  $30,000,  .  .  18  00 

Over  $30,000  but  not  over  $60,000,  .  36  00 

Over  $60,000  but  not  over  $120,000,  .  60  00 

Over  $120,000  but  not  over  $240,000,  .  90  00 

Over  $240,000  but  not  over  $360,000,  .  120  00 

Over  $360,000  but  not  over  $480,000,  .  180  00 

Over  $480,000  but  not  over  $600,000,  .  240  00 

Over  $600,000  but  not  over  $900,000,  .  300  00 

Over  $900,000  but  not  over  $1,200,000,  .  450  00 

Over  $1,200,000, 60000 

Delaware™  R,  S.,  p.  547;  L.  1901,  Ch.  15,  §  4. 
(A  specific  tax  of  $5,  and  %o  of  \% 
of  the  cost  value  of  the  merchandise 
and  stock  in  trade.) 

Florida™  L.  1895,  Ch.  4322,  §  9,  If  4.  (A  tax 
graded  according  to  the  amount  and 
value  of  the  capital  stock.) 

118  Such  corporations  are  exempt  from  the  franchise  tax.    See  note  108. 

119  In  addition  to  the  above  state  tax,  counties,  cities  and  towns  may 
impose  a  further  tax,  not  exceeding  50%  of  the  state  tax, 


284  Digest  of  Corporation  Laws. 

Where  the  amount  is  not  over  $1,000,  .  $3  00 
On  each  additional  $1,000  up  to  $10,000,  .  3  00 
On  each  additional  $1,000  over  $10,000,  .  1  00 

Louisiana,120  L.  1898,  No.  171,  §  6.  (A  tax  graded 
according  to  the  amount  of  gross  annual 
sales.) 

„  (1)  Wholesale  dealers  : 

Where  the  amount  is  not  over  $250,000,  .  $50  00 
Over  $250,000  but  not  over  $500,000,  .  100  00 
Over  $500,000  but  not  over  $600,000,  .  150  00 
Over  $600,000  but  not  over  $800,000,  .  200  00 
Over  $800,000  but  not  over  $1,000,000,  .  250  00 
Over  $1,000,000  but  not  over  $1,500,000,  .  300  00 
Over  $1,500,000  but  not  over  $2,000,000, .  400  00 
Over  $2,000,000  but  not  over  $2,500,000, .  550  00 
Over  $2,500,000  but  not  over  $3,000,000,  .  700  00 
Over  $3,000,000  but  not  over  $4,000,000, .  750  00 
Over  $4,000,000  but  not  over  $5,000,000,  .  1,000  00 
Over  $5,000,000  but  not  over  $5,500,000,  .  1 ,500  00 
Over  $5,500,000  but  not  over  $6,000,000, .  2,000  00 
Over  $6,000,000  but  not  over  $6,500,000, .  2,500  00 
Over  $6,500,000  but  not  over  $7,000,000, .  3,000  00 
Over  $7,000,000, 3,500  00 

(2) Retail  dealers: 

Where  the  amount  is  not  over  $5,000,  .  $5  00 

Over  $5,000  but  not  over  $15,000,     .  .  10  00 

Over  $15,000  but  not  over  $20,000,   .  .1500 

Over  $20,000  but  not  over  $25,000,   .  20  00 

Over  $25,000  but  not  over  $30,000,  .  25  00 

Over  $30,000  but  not  over  $40,000,  .  30  00 

Over  $40,000  but  not  over  $50,000,  .  40  00 

Over  $50,000  but  not  over  $75,000,  .  .5000 

Over  $75,000  but  not  over  $100,000,  .  75  00 

Over  $100,000  but  not  over  $150,000,  .  100  00 

Over  $150,000  but  not  over  $200,000,  .  150  00 

Over  $200,000  but  not  over  $250,000,  .  200  00 

Over  $250,000  but  not  over  $300,000,  .  250  00 

Over  $300,000  but  not  over  $400,000,  .  300  00 

120  An  additional  local  tax,  not  exceeding  the  amount  of  the  state  tax, 
may  also  be  levied.    Constitution,  Art.  229. 


The  Tax  on  Mercantile  Business.          285 

Over  $400,000  but  not  over  $600,000,         .  $400  00 

Over  $600,000  but  not  over  $700,000,         .     550  00 

Over  $700,000  but  not  over  $750,000,        .     700  00 

Over  $750,000  but  not  over  $1,000,000,     .     750  00 

Over  $1,000,000  but  not  over  $1,500,000, .  1,000  00 

Over  $1,500,000  but  not  over  $2,000,000, .  1,500  00 

Over  $2,000,000  but  not  over  $2,500,000, .  2,000  CO 

Over  $2,500,000  but  not  over  $3,000,000, .  2,500  00 

Over  $3,000,000  but  not  over  $3,500,000, .  3,000  00 

Over  $3,500,000,       .                  .         .         .  3,500  00 

Maryland,  P.  G.  L.,  Ch.  56,  §§  37-49.  (A  tax 
graded  according  to  the  average  amount 
and  value  of  the  stock  of  goods  kept 
on  hand.) 

Where  the  amount  is  not  over  $1,000,  .     $12  00 

Over  $1,000  but  not  over  $1,500,       .  .1500 

Over  $1,500  but  not  over  $2,500,       .  .1800 

Over  $2,500  but  not  over  $4,000,       .  22  00 

Over  $4,000  but  not  over  $6,000,       .  .       30  00 

Over  $6,000  but  not  over  $8,000,       .  40  00 

Over  $8,000  but  not  over  $10,000,     .  .5000 

Over  $10,000  but  not  over  $15,000,   .  .6500 

Over  $15,000  but  not  over  $20,000,   .  .       80  00 

Over  $20,000  but  not  over  $30,000,   .  .     10000 

Over  $30,000  but  not  over  $40,000,  .  .     125  00 

Over  $40,000, 250  00 

Mississippi,  L.  1898,  Ch.  5,  §  79.  (A  tax  graded 
according  to  the  amount  of  stock  in 
each  store.) 

Where  the  amount  is  not  over  $300,  .  $2  50 

Over  $300  but  not  over  $1 ,000,           .  .         5  00 

Over  $1,000  but  not  over  $2,000,       .  10  00 

Over  $2,000  but  not  over  $3,500,       .  .       15  00 

Over  $3,500  but  not  over  $5,000,       .  .       20  00 

Over  $5,000  but  not  over  $7,500,       .  25  00 

Over  $7,500  but  not  over  $10,000,     .  30  00 

Over  $10,000  but  not  over  $12,000,    .  .3500 

Over  $12,000  but  not  over  $15,000,  .  40  00 

Over  $15,000  but  not  over  $20,000,  .  50  00 


286  Digest  of  Corporation  Laws. 

Over  $20,000  but  not  over  $25,000,  .  .  $60  00 

Over  $25,000  but  not  over  $35,000,  .  85  00 

Over  $35,000  but  not  over  $50,000,  .  .  100  00 

Over  $50,000  but  not  over  $75,000,  .  .  150  00 

Over  $75,000  but  not  over  $100,000,  .  175  00 

Over  $100,000  but  not  over  $250,000,  .  200  00 

Over  $250,000, 250  00 

Missouri,  R.  S.,  §§  8540-8542,  8566.  (Though 
named  a  license  tax,  this  tax  is  levied 
on  the  property  valuation  of  the  mer- 
chandise and  stock  in  trade,  at  the  uni- 
form property  rate  for  state  purposes. 
See  note  2.) 

Montana,  L.  1901,  p.  144,  §  2.  (A  tax  graded  ac- 
cording to  the  amount  of  the  average 
sales.) 

Where  the  amount  is  not  over  $4,800,  .  $12  00 

Over  $4,800  but  not  over  $15,000,     .  36  00 

Over  $15,000  but  not  over  $30,000,  .  48  00 

Over  $30,000  but  not  over  $60,000,   .  60  00 

Over  $60,000  but  not  over  $120,000,  .  96  00 

Over  $120,000  but  not  over  $240,000,  .  144  00 

Over  $240,000  but  not  over  $360,000,  .  180  00 

Over  $360,000  but  not  over  $480,000,  .  240  00 

Over  $480,000  but  not  over  $600,000,  .  300  00 

Over  $600,000  but  not  over  $900,000,  .  480  00 

Over  $900,000  but  not  over  $1,200,000,  .  720  00 

Over  $1,200.000, 900  00 

Nevada,™  Comp.  L.,   §   1192.      (Graded  according 
to  the  average  amount  of  sales.) 

Where  the  amount  is  not  over  $12,000,      .     $30  00 
Over  $12,000  but  not  over  $60,000,   .  45  00 

Over  $60,000,  same  graded  tax  as  in  Cali- 
fornia. 

New  Mexico,™  Comp.  L.,  §  4141.  (A  tax  graded 
according  to  the  amount  of  annual 
sales.) 

121  This  tax  goes  to  the  general  county  fund.    Ibid.,  §  1203. 

122  One-half  of  this  taxis  for  the  general  school  fund,  the  remainder 
for  county  purposes. 


The  Tax  on  Mercantile  Business.          287 

Over  $5,000  but  not  over  $10,000,     .         .  $10  00 
Over  $10,000  but  not  over  $20,000,   .  20  00 

Over  $20,000  but  not  over  $50,000,   .  50  00 

Over  $50,000.  but  not  over  $75,000,   .  75  00 

Over  $75,000  but  not  over  $100,000,  .  100  00 

Over  $100,000,          .....  150  00  . 

North  Carolina,  L.  1901,  Ch.  9,  §  77.  (A  tax 
graded  according  to  the  amount 
of  gross  annual  sales.) 

Where  the  amount  is  not  over  $500,  .  $0  50 

Over  $500  but  not  over  $1,000,           .  .  100 

Over  $1,000  but  not  over  $2,000,       .  .  150 

Over  $2,000  but  not  over  $5,000,       .  .  2  50 

Over  $5,000  but  not  over  $10,000,     .  .  4  00 

Over  $10,000  but  not  over  $20,000,   .  .  8  00 

Over  $20,000  but  not  over  $40,000,   .  12  00 

Over  $40,000  but  not  over  $60,000,    .  16  00 

Over  $60,000  but  not  over  $80,000,   .  .  20  00 

Over  $80,000  but  not  over  $100,000,       .  .  24  00 

Over  $100,000  but  not  over  $150,000,  .  2800 

Over  $150,000  but  not  over  $200,000,  .  30  00 

Over  $200,000  but  not  over  $300,000,  .  35  00 

Over  $300,000  but  not  over  $500,000,  .  40  00 

Over  $500,000  but  not  over  $750,000,  .  50  00 

Over  $750,000  but  not  over  $1,000,000,  .  60  00 

On  $1,000,000  or  over,      .         .         .  .7000 

And  an  additional  specific  tax  of  .  1  00 

Pennsylvania,  L.  1899,  p.  184.  (The  tax  is  a  fixed 
percentage  of  the  whole  volume 
gross  of  business  transacted  annu- 
ally, and  in  addition  a  specific  tax 
of  $3.) 


Retail  dealers,  .         .      '   .         .         .          ^of  1 
Wholesale  dealers,     .         .         .         . 


Tennessee,  Code,  §  711.  (In  addition  to  the  uniform 
property  tax  on  the  capital  invested  in 
the  business,  merchants  are  required  to 
pay  a  privilege  tax  of  %Q  of  1  %  ,  but 
not  less  than  $5.) 


288  Digest  of  Corporation  Laws. 

Texas™  L.  1897  (Spec.  Sess.),  Ch.  18,  §  1.  (A 
tax  graded  according  to  the  amount  of 
annual  purchases.) 

Where  the  amount  is  not  over  $2,000,  .       $3  00 

Over  $2,000  but  not  over  $5,000,       .  .         6  00 

Over  $5,000  but  not  over  $10,000,     .  .1200 

Over  $10,000  but  not  over  $15,000,   .  .2000 

Over  $15,000  but  not  over  $25,000,   .  25  00 

Over  $25,000  but  not  over  $50,000,   .  60  00 

Over  $50,000  but  not  over  $150,000,  .     125  00 

Over  $150,000  but  not  over  $250,000,  .     150  00 

Over  $250,000  but  not  over  $500,000,  .     200  00 

Over  $500,000  but  not  over  $750,000,  .     250  00 

On  $750,000  or  over,         .         .         .  .     300  00 

Virginia,  L.  1900,  Ch.  796.  (A  tax  graded  ac- 
cording to  the  amount  of  purchases, 
and  such  tax  shall  be  in  lieu  of  all 
state  taxes  on  the  capital  so  em- 
ployed.) 

Where  the  amount  is  not  over  $1,000,  .       $5  00 

Over  $1,000  but  not  over  $2,000,       .  .1000 

For  each  additional  $100  up  to  $50,000,  .             30 

For  each  additional  $100  over  $50,000,  .             10 

123  In  addition  to  the  above  state  tax,  authority  is  given  for  the  assess- 
ment of  a  local  tax  not  exceeding  50%  of  the  state  tax.  Constitution, 
Art.  8,  §  1. 


License  Taxes,  Foreign  Corporations.       289 

CHAPTER  VIII. 

LICENSE  TAXES  ON  FOREIGN  COEPOEATIONS. 


In  the  taxation  of  foreign  corporations  under  the  property 
tax  the  jurisdiction  of  the  state  and  its  taxing  authority  de- 
pends, as  we  have  already  seen,  on  the  situs  of  the  corporate 
property.  But  as  license  taxes  are  levied  not  on  the  prop- 
erty but  on  the  privileges  of  the  corporation,  this  principle 
no  longer  applies.  The  authority  of  the  state  to  levy  prac- 
tically any  form  of  license  tax  it  may  choose  extends  to  the 
levy  of  such  taxes  on  foreign  corporations  equally  with  do- 
mestic, except  in  so  far  as  state  authority  is  restricted  by 
the  Federal  constitution. 

Thus  the  states  have  no  powers,  by  taxation  or  otherwise, 
to  retard,  burden,  impede  or  in  any  manner  control  the 
operations  of  any  agency  of  the  Federal  government,  though 
they  may  tax  its  property.124  Similarly  the  states  cannot 
usurp  the  exclusive  powers  of  Congress 125  by  imposing  any 
tax  on  the  operations  of  interstate  commerce.126  Except  in 
matters  of  local  concern,  commerce  among  the  several  states 
must  be  free.  These  provisions,  however,  apply  to  rail- 
roads and  other  public  service  corporations  rather  than  to 
ordinary  business  corporations. 

On  the  other  hand,  corporations  are  not  citizens  within 
the  meaning  of  the  clause  in  the  Federal  constitution127 
which  declares  that  the  citizens  of  each  state  shall  be  en- 
titled to  all  the  privileges  and  immunities  of  citizens  in  the 

124McCulloch  v.  Maryland,  4  Wheat.  (U.  S.)  316;  Osborn  v.  Bank  of 
U.  S.,  9  Wheat.  (U.  S.)  738;  West.  Union  Tel.  Co.  v.  Att'y  Gen'l,  125 
U.  S.  530. 

125  U.  S.  Constitution,  Art.  1,  §  8, 1"  2. 

126  Norfolk,  etc.,  R.  Co.  v.  Pennsylvania,  136  U.  S.  114;  McCaU  v. 
California,  136  U.  S.  104 ;  Bobbins  v.  Shelby  Co.  Taxing  District,  120 
U.  S.  489,  497. 

127  U.  S.  Constitution,  Art.  4,  §  2. 


290  Digest  of  Corporation  Laws. 

several  states.128  Neither  does  the  provision  in  the  four- 
teenth amendment  of  the  United  States  constitution  that  no 
state  shall  "  deny  to  any  person  within  its  jurisdiction  the 
equal  protection  of  the  laws  "  require  that  foreign  corpora- 
tions shall  be  granted  the  same  privileges  as  domestic  cor- 
porations of  the  same  character.129 

A  corporation  is  the  creature  of  the  law  of  the  state  cre- 
ating it,  and  as  such  laws  can  have  no  extra-territorial  effect, 
"  a  corporation  can  have  no  legal  existence  out  of  the  bound- 
aries of  the  sovereignty  by  which  it  is  created.  It  exists 
only  in  contemplation  of  law  and  by  force  of  the  law ;  and 
where  that  law  ceases  to  operate,  and  is  no  longer  obliga- 
tory, the  corporation  can  have  no  existence.  It  must  dwell 
in  the  place  of  its  creation,  and  cannot  migrate  to  another 
sovereignty."130 

Consequently,  a  corporation  cannot  exercise  its  franchise 
in  another  state  as  a  matter  of  legal  right,  but  only  on  the 
principle  of  inter-state  comity.  Foreign  corporations  may 
be  excluded  entirely,131  or  they  may  be  so  taxed  or  other- 
wise burdened  as  to  compel  them  to  leave  the  state.132  They 
can  be  admitted  to  the  state,  and  can  exercise  their  corporate 
privileges  therein,  only  upon  conforming  to  such  terms  and 
conditions  as  the  state  may  prescribe.133  But  through  a 
liberal  construction  of  the  doctrine  of  inter-state  comity,  as 
well  as  on  the  ground  of  expediency  and  state  policy,  for- 
eign corporations  are  generally  permitted  to  do  business  in 
the  state  upon  as  liberal  terms  as  domestic  corporations. 

128  Bank  of  Augusta  v.  Earle,  13  Pet.  (U.  S.)  519  ;  Pembina,  etc.,  Min- 
ing Co.  v.  Pennsylvania,  125  U.  S.  181. 

129  Pembina,  etc..  Mining  Co.  v.  Pennsylvania,  125  U.  S.  181 ;  Philadel- 
phia Fire  Assoc'n  v.  New  York,  119  U.  S.  110. 

130  Bank  of  Augusta  v.  Earle,  13  Pet.  (U.  S.)  519, 588 ;  Newark  v.  India 
Rubber  Co.,  1  Blatchf .  (U.  S.)  628 ;  Ohio,  etc.,  R.  R.  Co.  v.  Wheeler,  1 
Black  (U.  S.)  286. 

131  Paul  v.  Virginia,  8  Wall.  (U.  S.)  168. 

132  Ducat  v.  Chicago,  48  111.  172. 

133  Bank  of  Augusta  v.  Earle,  13  Pet.  (U.  S.)  519  ;  Norfolk,  etc.,  R.  R. 
Co.  v.  Pennsylvania,  136  U.  S.  114 ;   Slaughter's  Case,  15  Gratt.  (Va.) 
767 ;  Tatem  v.  Wright,  3  Zabr.  (N.  J.)  429 ;  West.  Union  Tel.  Co.  v. 
Lieb,  76  111,  172. 


The  Charter  Fee,  Foreign  Corporations.    291 

TITLE  A.    THE   CHARTER  FEE. 

In  the  sense  that  the  charter  fee  is  a  license  for  the  privi- 
lege of  incorporation,  it  cannot  apply  to  foreign  corpora- 
tions, as  they  acquire  their  legal  existence  in  another  state^ 
But  foreign  corporations,  though  they  need  not  seek  the 
privilege  of  incorporation,  require  the  official  sanction  of  the 
state  in  which  they  wish  to  do  business.  The  statutes 
usually  provide  that  such  sanction  shall  be  given  upon  filing 
a  properly  authenticated  copy  of  the  charter  in  the  office  of 
the  Secretary  of  State,  and  paying  a  prescribed  fee  for  the 
privilege  so  granted.  In  other  words,  while  domestic  cor- 
porations must  pay  a  fee  for  their  creation,  foreign  corpora- 
tions must  pay  a  fee  for  their  adoption  by  the  state.  The 
resemblance  between  the  privilege  granted  in  either  case  is 
so  close  that  the  term  charter  fee  may,  with  sufficient  accu- 
racy, be  used  to  include  the  fees  paid  both  by  foreign  and 
domestic  corporations. 

Some  states,  recognizing  the  fact  that  foreign  corporations 
have  already  paid  for  the  privilege  of  incorporation  in  an- 
other state,  require  only  a  small  specific  fee  from  foreign 
corporations  instead  of  taxing  them  like  domestic  corpora- 
tions on  the  amount  of  their  capital  stock.  Moreover,  where 
the  capital  stock  is  made  the  basis  of  taxation,  the  fee  is 
frequently  levied  only  on  the  proportion  of  the  capital  stock 
represented  by  the  property  owned  or  business  to  be  trans- 
acted in  the  state.  The  tendency  to  adopt  such  a  standard 
of  taxation  is  strongly  marked  in  recent  legislation. 

Other  states,  however,  require  foreign  corporations  to 
pay  a  similar  fee  to  domestic  corporations,  or  even  a  greater 
fee,  upon  their  total  authorized  capital  stock.  If  it  be 
deemed  good  policy,  the  state  may  discriminate  between 
foreign  and  domestic  corporations,  and  tax  the  former  at  a 
higher  rate,134  unless  such  taxation  is  repugnant  to  some  pro- 
vision of  the  state  or  Federal  constitution.135 

134  Ducat  v.  Chicago,  48  111.  172 ;  Germania  Life  Ins.  Co.  v.  Com.,  85 
Pa.  St.  513;  Pacific  Express  Co.  v.  Seibert,  142  U.  S.  339,  355;  New 
Orleans  v.  Pont.  Ry.  Co.,  41  La.  Arm.  519,    But  see  contra,  Erie  Ry.  Co. 
v.  State,  31  N.  J.  L.  531,  543. 

135  For  a  fuller  discussion  of  the  taxation  and  general  legal  status  of 
foreign  corporations,  see  Thompson's  Corporations,  Vol.  6,  Title  19. 


292  Digest  of  Corporation  Laws. 


ART.  1.  THERE  IS  NO  PROVISION  FOR  THE  PAYMENT  OF  ANY 
CHARTER  FEE  BY  FOREIGN  CORPORATIONS  OTHER 
THAN  A  NOMINAL  CLERICAL  OR  RECORDING  FEE. 

District  of  Columbia.      \  Maine. 


Florida. 

Georgia. 

Idaho. 

Indian  Territory. 

Louisiana. 


Nevada. 

New  Hampshire. 

North  Carolina. 

Oregon. 

Vermont. 


ART.  2.    THE  FEE  IS  A  FIXED  SUM  INDEPENDENT  OF  THE  AMOUNT 
OF  THE   CAPITAL  STOCK. 


Sec.  a.  The  fee  is  similar  to  that  paid  by  domestic  corpora- 
tions. 

Arizona,  R.  S.,  §§  902,  2592. 

Arkansas,  L.  1899,  Act  19,  §  2. 

Oklahoma,  Stat.,  §  1167. 

South  Dakota,  Stat.,  §  1911. 

Washington,  Code,  §§  4285,  4287. 

West  Virginia,  L.  1901,  Ch.  35,  §§  30,  36. 

Sec.  b.  Though  domestic  corporations  pay  a  fixed  percent- 
age of  the  amount  of  the  capital  stock,  or  a  fee 
graded  according  to  such  amount. 

Connecticut,  G.  S. ,  §  48 1 1 .  ($10  for  filing  charter  and 
$5  for  filing  required  statement.) 

Delaware,  L.  1893,  Ch.  703.      (A  fee  of  $50.) 

Maryland,  L.  1898,  Ch.  270.  ($25  for  filing  char- 
ter.) 

Massachusetts,  R.  L.,  Ch.  126,  §  20.  ($10  for  filing 
charter  and  $5  for  filing  required 
statement.) 

Mississippi,  L.  1900,  Ch.  45.  ($15  for  filing  char- 
ter.) 

Montana,  L.  1899,  p.  44.      ($20  for  filing  charter.) 

New  Jersey,  L.  1896,  Ch.  185,  §  114.  (A  fee  of 
$10.) 


The  Charter  Fee,  Foreign  Corporations.     293 

North  Dakota,  Code,   §§  95,  3261.      ($5  for  filing 

charter  and  $3  for  designation  of 

agent.) 

Rhode  Island,  L.  1899,  Ch.  431.     (A  fee  of  $100.) 
/South  Carolina,  Civ.  Code,  §  1888.     ($10  for  filing 

charter  and  declaration.) 
Tennessee,  L.  1899,  Chs.  2,  431.      (A  privilege  tax 

of  $100  and  $20  for  filing  charter.) 
Utah,  K.  S.,  §  965;  L.  1901,  p.  58.     ($25  for  filing 

charter  of  foreign  corporations  not 

organized   for  doing   business   in 

the  state.) 


ART.  3.    THE   CHARTER  FEE   IS   LEVIED   ON   THE    TOTAL  AMOUNT 
OF  THE  AUTHORIZED  CAPITAL  STOCK. 

Sec.  a.    The  fee  is  a  fixed  percentage  of  such  amount,  and 
the  same  percentage  for  foreign  as  domestic  corporations. 

Kentucky,™  Constit.,  §  202. 

Nebraska,  Comp.  Stat.,  §  4991. 

Utah,  R.  S.,  §  965;  L.  1901,  p.  58.  (Foreign  cor- 
porations organized  to  do  business  in  the 
state.) 

Sec.  b.    The  fee  is  graded  according  to  the  amount  of  the 
total  capital  stock. 

Par  1.    Foreign  corporations  pay  the  same  fee  as  domestic. 

Alabama,  Civ.  Code,  §  1321. 

California,  L.  1901,  p.  108,  Ch.  93. 

Iowa,  Code,   §   1637;   L.   1898,  Ch.  40;    L.   1902, 

Ch.  66. 

Kansas,  G.  S.,  §§  1260,  1261,  1264. 
New  Mexico,  L.  1899,  Ch.  77. 
Virginia,  L.  1902,  Ch.  509. 
Wyoming,  R.  S.,  §  3030. 

we  There  is  no  specific  provision  for  the  payment  of  such  charter  fee 
by  foreign  corporations,  but  the  constitutional  provision  that  no  foreign 
corporation  can  do  business  in  the  state  on  more  favorable  conditions 
than  domestic  corporations  would  seem  to  require  the  payment  of  a 
similar  charter  fee  by  resident  foreign  corporations. 


294  Digest  of  Corporation  Laws. 

Par.  2.    Foreign  corporations  pay  a  different  fee  from  domestic. 

Colorado,  L.  1901,  Ch.  52,  §§  4,  5,  10.      (A  larger 
fee  than  domestic.) 

For  capital  stock  up  to  $50,000,         .         .  $30  00 

For  each  additional  $1,000,        .         .         .  30 

•  For  increase,  on  each  $1,000,     ...  30 

For  filing  certified  copy  of  foreign  laws,     .  5  00 

For  filing  designation  of  agent,           .         .  5  00 
For  certificate  of  full  payment  of  fees  and 

taxes, 5  00 

Texas,  R.  S.,  §  2439.      (A  smaller  fee  than  domes- 
tic.) 

For  capital  stock  up  to  $100,000,       .  .  $2500 

Over  $100,000  but  less  than  $500,000,  .  50  00 

For  $500,000  or  over,  up  to  $1,000,000,  .  100  00 

Over  $1,000,000,        .         .         .         .  .  200  00 

ART.  4.  THE  CHARTER  FEE  IS  LEVIED  ON  THE  PROPORTION  OF 
THE  CAPITAL  STOCK  REPRESENTED  BY  PROPERTY 
OWNED  AND  USED,  AND  BUSINESS  TRANSACTED  IN 
THE  STATE. 

Sec.  a.    The  fee  is  a  fixed  percentage  on  such  proportionate 

amount. 

Par.  1.    Foreign  corporations  pay  the  same  fee  as  domestic. 

Indiana,  Ann.  Stat.,  §  3461b. 

Michigan,  Comp.  L.,  §  8574;  L.  1901,  No.  206. 

Ohio,  L.  1902,  p.  539. 

Pennsylvania,  L.  1901,  No.  121. 

Par.  2.    Foreign  corporations  pay  a  larger  fee  than  domestic. 

New  York,  G.  L.,  Ch.  24,  §  181 ;  L.  1901,  Ch.  558. 
(£  of  \%  and  $10  for  filing  charter.) 

Sec.  b.  The  fee  is  graded  according  to  such  proportionate 
amount  of  the  capital  stock  in  the  same  manner 
and  at  the  same  rate  as  for  domestic  corporations. 

Illinois,  E.  S.,  Ch.  32,  §  67c. 
Minnesota,  L.  1899,  Ch.  69. 


The  Franchise  Tax,  Foreign  Corporations.   295 

Missouri,  R.  S.,  §§  1025,  1315,  1316  (also  a  license 

fee  of  $10). 

Wisconsin,  Stat.,  §  1770b;  L.  1899,  Ch.  351,  §  27  ; 
L.  1901,  Ch.  399,  §  1. 

TITLE  B.    THE  ANNUAL  FRANCHISE  TAX. 

On  the  principles  already  stated,  a  franchise  tax  may  be 
imposed  on  foreign  corporations  for  the  privilege  of  exer- 
cising their  corporate  privileges  in  the  state.  Some  states, 
however,  limit  the  franchise  tax  to  domestic  corporations. 
Other  states  tax  only  the  proportion  of  the  capital  stock 
represented  by  property  owned  and  business  transacted  in 
the  state,  while  still  others  tax  the  total  authorized  capital 
stock.  So  also  the  tax  rate  is  in  some  states  the  same,  in 
others  greater,  and  in  others  less  than  the  rate  for  domestic 
corporations.  These  varieties  of  practice  simply  represent 
different  views  of  state  policy. 

ART.    1.     THE    TAX    IS    A    FIXED    SUM,    INDEPENDENT    OF    THE 
AMOUNT  OF  THE   CAPITAL  STOCK. 

Washington,  Code,   §  4289.      (The  same  as  for  do- 
mestic corporations.) 

ART.  2.  THE  TAX  IS  LEVIED,  ON  A  PERCENTAGE  BASIS,  UPON  THE 
AMOUNT  OF  THE  CAPITAL  STOCK  PAID  IN,  IN  CASH  OR 
OTHERWISE,  AND  THE  RATE  IS  LOWER  THAN  FOR 
SIMILAR  DOMESTIC  CORPORATIONS. 

Massachusetts,  R.  L.,  Ch.  14,  §  50.  (Foreign  cor- 
porations of  the  same  kind  as  the 
domestic  corporations  subject  to  a 
franchise  tax  pay  y2o  of  1%,  but 
not  over  $300.  See  Chap.  VII., 
Title  B,  Art.  2,  Sec.  c,  above.) 

ART.  3.  THE  TAX  IS  LEVIED,  ON  A  PERCENTAGE  BASIS  OR  BY  A 
GRADUATED  SCALE,  UPON  THE  TOTAL  AMOUNT  OF  THE 
AUTHORIZED  CAPITAL  STOCK. 

Sec.  a.    Foreign  corporations  pay  the  same  tax  as  domestic. 

Alabama,  L.  1901,  p.  2616. 

North  Carolina,  L.  1901,  Ch.  9,  §  91. 

Vermont,  Stat.,  §  575. 


296  Digest  of  Corporation  Laws. 

Sec.  b.  Foreign  corporations  pay  a  greater  tax  than  domestic. 

Colorado,  L.  1902,  Ch.  3,   §   65.      (%50  of  \%  ;  4 

cents  on  each  $1,000.) 
Texas,  L.  1897,  Ch.  120. 

For  capital  stock  up  to  $25,000,         .         .     $25  00 

Over  $25,000  but  oot  over  $100,000,  .     100  00 

For  each  additional  $10,000  up  to  $1,000,000,       1  00 

For  each  additional  $100,000  over  $1,000,000,      1  00 

ART.  4.  THE  TAX  IS  LEVIED,  ON  A  PERCENTAGE  BASIS  OR  BY  A 
GRADUATED  SCALE,  ON  THE  PROPORTION  OF  THE  AU- 
THORIZED CAPITAL  STOCK  REPRESENTED  BY  THE  PROP- 
ERTY AND  BUSINESS  OF  THE  CORPORATION  IN  THE 
STATE,  AND  THE  RATE  IS  THE  SAME  AS  FOR  DOMESTIC 
CORPORATIONS. 

New  York,  G.  L.,  Ch.  24,  §  182;  L.  1901,  Ch. 
558.  (Computed  according  to  the 
rate  of  dividends,  as  in  the  case  of 
domestic  corporations.) 

Ohio,  L.  1902,  p.  124,  §  2. 

West  Virginia,  L.  1901,  Ch.  35,  §  36.  (Foreign 
corporations  whose  property  in  the 
state  is  assessed  for  $5,000  or  over 
pay  at  the  same  rate  as  resident 
domestic  corporations,  but  the 
minimum  tax  is  $100.  Other  for- 
eign corporations  must  pay  the 
higher  rates  prescribed  for  non- 
resident corporations.) 

ART.  5.     DOMESTIC  CORPORATIONS  ARE  SUBJECT  TO  A  FRANCHISE 
TAX  BUT  FOREIGN   CORPORATIONS  ARE  EXEMPT. 

Delaware.  Maine. 

New  Jersey. 


The  Occupation  Tax,  Foreign  Corporations.  297 


TITLE   C.      THE  OCCUPATION  TAX. 

As  the  occupation  tax  is  not  a  personal  tax  or  a  property 
tax,  but  a  tax  on  the  particular  occupation,  business  or  em- 
ployment, it  must  be  uniform  as  to  all  persons  engaged  ~nr 
it,  whether  they  are  individuals  or  corporations,  citizens  or 
aliens.  The  state,  therefore,  cannot  discriminate  against 
foreign  corporations  by  levying  a  higher  tax  on  them  than  on 
other  corporations  or  persons  engaged  in  the  same  business.137 
But  all  foreign  corporations  exercising  within  the  state  any 
occupation  subject  to  taxation  must  pay  the  same  fees  as  resi- 
dents of  the  state.  Foreign  corporations,  therefore,  which 
carry  on  a  manufacturing  or  mercantile  business  in  the  state 
are  subject  to  the  taxes  enumerated  for  similar  domestic  cor- 
porations in  the  preceding  chapter. 

137  Exparte  Thornton,  12  Fed.  Rep.  538. 


APPENDIX  B. 


RECEIPTS  FROM  TAXATION  OF  CORPORATE  FRANCHISES. 

The  Committee  on  Corporation  Laws  has  endeavored  to 
secure  from  each  of  the  states  a  statement  of  the  amount,  if 
any,  received  from  the  taxation  of  corporate  franchises. 
The  summary  of  the  results  of  this  investigation  which  is 
printed  below  shows  that  in  a  majority  of  the  states  no 
franchise  tax  is  imposed  upon  either  domestic  or  foreign  cor- 
porations. It  should  be  noted  that  in  the  states  where  such 
a  tax  is  imposed,  with  the  exception  of  Massachusetts  and 
Pennsylvania,  the  figures  indicate  the  amount  of  such  tax 
collected  from  all  corporations,  including  business,  public 
service  and  in  many  cases  financial  institutions.  It  has 
been  impossible  for  the  committee,  without  incurring  un- 
warranted expense,  to  segregate,  except  in  the  two  cases 
above  mentioned,  the  proportion  received  from  business 
corporations.  As  a  basis  of  comparison,  therefore,  the  fig- 
ures given  below  cannot  be  relied  upon.  It  should  also 
be  noted  that  no  inquiry  has  been  made  into  the  revenue 
derived  by  the  various  states  from  organization  fees. 

Alabama.     No  return. 

Arkansas.     No  franchise  tax  on  domestic  or  foreign 

.  o 

corporations. 
California.     Taxes  locally  collected.     Impossible  to 

secure  data. 
Colorado.     New  law.     Estimated  revenue  in    1902 

from  franchise  tax  on  domestic  and 

foreign  corporations,  $75,000. 
Connecticut.     No  franchise  tax  on  domestic  or  for- 
eign corporations. 


300  Appendix  B. 

Delaware.  Franchise  tax  on  domestic  corporations 
(including  public  service)  : 

1900, $8,307  95 

1901, 25,865  10 

No  franchise  tax  on  foreign  corporations. 

District  of  Columbia.  No  franchise  tax  on  domestic 
or  foreign  corporations. 

Florida.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Georgia.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Idaho.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Indiana.  Taxes  locally  collected.  Impossible  to 
secure  data. 

Iowa.  No  franchise  tax  on  domestic  or  foreign  cor- 
porations. 

Kansas.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Kentucky.     No  return. 

Louisiana.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Maine.  New  law.  Franchise  tax  in  1901  (including 
public  service),  $39,225. 

Maryland.  Franchise  tax  in  1901  (exclusively  pub- 
lic service),  $36,941.80. 

Massachusetts.  Franchise  tax  on  domestic  business 
corporations : 

1899,         .         .         .         .       '.         .     $277,334  82 

1900, 334,108  10 

1901, 331,434  38 

No  franchise  tax  on  foreign  corporations. 

Michigan.     No  franchise  tax  on  domestic  or  foreign 

corporations. 
Minnesota.     No  franchise  tax  on  domestic  or  foreign 

corporations. 


Receipts  from  Franchise,  Tax.  301 

Mississippi.  Taxes  locally  collected.  Impossible  to 
secure  data. 

Missouri.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Montana.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Nebraska.  Taxes  locally  collected.  Impossible  to 
secure  data. 

Nevada.     No  return. 

New  Hampshire.  No  franchise  tax  on  domestic  or 
foreign  corporations. 

New  Jersey.  Franchise  tax  on  all  domestic  corpora- 
tions (including  public  service)  : 

1899, $971,154  48 

1900, 1,494,719  70 

1901,  .         .         .         .         .         .    1,633,074  19 

No  franchise  tax  on  foreign  corporations. 

New  York.  Eeceipts  from  tax  assessed  to  domestic 
and  foreign  corporations  based  on 
amount  of  capital  employed  (includ- 
ing public  service  corporations)  : 

1899, $2,266,650  00 

1900,         .         .         .         .         .         .    2,624,508  05 

1901, 4,966,680  93 

North  Carolina.  Taxes  locally  collected.  Impos- 
sible to  secure  data. 

North  Dakota.     No  return. 

Ohio.  New  law.  Franchise  tax  on  domestic  and 
foreign  corporations  (including  pub- 
lic service) .  Receipts  to  August  6  : 

1902,  .         .         .         .         .         .         .       $425,000 

Oregon.  No  franchise  tax  on  domestic  or  foreign 
corporations. 


302  Appendix  B. 

Pennsylvania.     Franchise  tax  on  domestic  and  foreign 
business  corporations  : 

1899, $799,964  59 

1900, 1,021,003  43 

1901, 1,005,184  23 

Rhode  Island.  No  franchise  tax  on  domestic  or 
foreign  corporations. 

/South  Carolina.     No  return. 

South  Dakota.  No  franchise  tax  on  domestic  or 
foreign  corporations. 

Tennessee.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Texas.     No  return. 

Utah.  No  franchise  tax  on  domestic  or  foreign  cor- 
porations. 

Vermont.  Franchise  tax  on  domestic  (business  and 
public  service)  corporations : 

1899, $7,887 

1900,  .         .         .         .         .         .         .         7,406 

1901,  . 8,140 

Franchise  tax  on  foreign  corporations  : 

1899, $4,115 

1900, 3,970 

1901,        . 4,245 

Virginia.  No  franchise  tax  on  domestic  or  foreign 
corporations. 

Washington.     No  return. 

West  Virginia.  Franchise  tax  under  old  law — total 
(business  and  public  service,  domes- 
tic and  foreign)  : 

1899,       .         .         .         .         .         .       $130,587  10 

1900, 140,155  00 


Receipts  from  Franchise  Tax.  303 

Franchise  tax  under  new  law  (business  and  public 
service)  : 

1901,  .       $322,078  50 


Foreign  corporations  : 

1901, $8,707  50 

Wisconsin.     No  franchise  tax  on  domestic  or  foreign 

O 

corporations. 

Wyoming.     No  franchise  tax  on  domestic  or  foreign 
corporations. 


APPENDIX  C. 


0f 


In  the  Year  One  Thousand  Nine  Hundred  and  Three. 


AN  ACT 

RELATIVE   TO  THE  TRANSFER  or  STOCK  IN  CORPORATIONS. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  in  General  Court 
assembled,  and  by  the  authority  of  the  same: — 

SECTION  1.     The   delivery   of  a  certificate  of  Transfer  of 

stock. 

stock  by  the  rightful  owner  or  by  a  person  en-  §• L>  109>  §§  37' 

R.'L.111,§59. 

trusted  by  him  with  its  possession  for  any  pur-  R.  L.  112,  §is. 
pose  to  a  bona  fide  purchaser  or  pledgee  for 
value,  with  a  written  transfer  thereof,  or  with  a 
written  power  of  attorney  to  sell,  assign  or  trans- 
fer the  same,  signed  by  the  person  named  as  the 
stockholder  in  such  certificate,  shall  be  a  sufficient 
delivery  to  transfer  title  as  against  all  persons ; 
but  no  such  transfer  shall  affect  the  right  of  the 
corporation  to  pay  any  dividend  due  upon  the 
stock,  or  to  treat  the  holder  of  record  as  the 
holder  in  fact  until  it  has  been  recorded  upon  the 
books  of  the  corporation,  or  until  a  new  certificate 
has  been  issued  to  the  person  to  whom  it  has  been 
so  transferred.  Such  purchaser  upon  production 
and  delivery  of  the  former  certificate  to  the 
treasurer  of  the  corporation  shall  be  entitled  to 


306  Appendix  C. 

receive  a  new  certificate.  Stock  shall  not  be 
transferred  upon  the  books  of  the  corporation  if 
any  instalments  thereon  remain  overdue  and  un- 
paid. A  pledgee  of  stock  transferred  as  collateral 
security  shall  be  entitled  to  a  new  certificate  if 
the  instrument  of  transfer  substantially  describes 
the  debt  or  duty  which  is  intended  to  be  secured 
thereby.  Such  new  certificate  shall  express  on 
its  face  that  it  is  held  as  collateral  security,  and 
the  name  of  the  pledgor  shall  be  stated  thereon, 
who  alone  shall  be  liable  as  a  stockholder,  and 
entitled  to  vote  thereon. 

Repeal.  SECTION  2.     Sections  thirty-six,   thirty-seven, 

thirty-eight  and  thirty-nine  of  chapter  one  hun- 
dred and  nine,  and,  so  far  as  they  relate  to  the 
transfer  of  stock,  section  fifty-nine  of  chapter  one 
hundred  and  eleven,  section  eighteen  of  chapter 
one  hundred  and  twelve  and  section  forty-two  of 
chapter  one  hundred  and  twenty-three  of  the 
Revised  Laws  are  hereby  repealed. 


Date  of  taking      SECTIONS.     This  act  shall  take  effect  upon  its 

effect. 

passage. 


j|[UR-      350  Main  Library 


ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 


DUE  AS  STAMPED  BELOW 


fCe  09  1987 

,-rn  ivi       rr  ;  u    n 

p  laaj  , 

1    L.B     U 

DOCS  DEPT. 

SENtONlLL 

JUW  t  J  2004 

u-  C.  BERKELEY 

«        S 

1 

i^i 

-  -       f-n-        f" 

"5       ^  j*         c 

•;     ro     : 

j 

1 

T       'C3 

i 

•*• 

3 

•i  ^ 

^n 

P 

,^» 

1 

^£ 

z. 

/ 

UNIVERSITY  OF  CM 
FORM  NO.  DD7.  68m,  1/82  BERKELEY, 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


